Amazon’s iRobot bid likely set for EU approval: Reuters

Shares of iRobot (IRBT), maker of the Roomba vacuum, jumped Friday morning on a Reuters report indicating European Union regulators are likely to approve Amazon’s (AMZN) $1.4 billion acquisition bid. Sources told Reuters the deal will meet competition requirements following an in-depth antitrust investigation, however the Federal Trade Commission (FTC) must also approve before the deal can officially proceed.

Yahoo Finance’s Tech Editor Dan Howley breaks down the details, providing insights into how Amazon could look to leverage iRobot’s data to improve the intelligence of Alexa devices if the deal closes.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

BRAD SMITH: Let’s talk about Roomba, or at least the company that manufactures its shares in iRobot. They’re rocketing this morning on a report that the European Commission will greenlight Amazon’s $1.4 billion bid for the company. Reuters saying the deal for the vacuum maker is on track for unconditional EU approval. Yahoo Finance’s Dan Howley here with us on this story.

Dan, what do we know, what significance now does this carry? I mean, for many people, they think iRobot, they think Roomba. Is this such a huge deal? And if so, why?

DAN HOWLEY: I think, you know, just the general crackdown that we’ve seen on big tech in recent months and years really is what we’re seeing here. You know, obviously, Amazon facing pressure globally because of their practices and what some governments or governmental organizations deem as monopolistic or violating antitrust law.

This is part and parcel of that discussion, whether or not they should be able to purchase a large company like iRobot. I think, you know, when it comes to this news out of the EU or this report out of the EU that they’re getting unconditional approval, it’s a win for Amazon, right? They’re going to be able to capture a lot more data from users because of these vacuums.

I mean, you know, it’s a vacuum cleaner maker, yes, as well as some other products, but they’re the disks that cats ride on around your home while they vacuum and you just don’t want to have to deal with that. So you know, it’s seemingly not that big of a deal of a product when you kind think of it that way, but it’s that data that would give Amazon a leg up.

And you know, the Alexa ecosystem that they offer, this would allow them to integrate that into that portfolio and potentially provide Amazon with a better look into consumers’ homes barring, you know, any kind of setbacks from consumers saying, look, we don’t want to provide that kind of access. If they can do that, then they can get a better understanding of what the average consumer’s household is like and then potentially, produce products that fit into that somehow.

So it’s really about the data here, that’s, you know, vacuums or vacuums, the data is much more important. For the EU to provide this kind of unconditional approval according to reports, that goes along with the UK, as well as the US, which is still looking at it, the FTC, although this really wasn’t brought up as part of the FTC’s lawsuit against Amazon. So we’re still wondering what’s going on there as far as approval goes.

But you know, if the EU is approving this, which is crack down significantly more on big tech than the US, then, you know, you have to wonder if the US then is going to approve this as well. And then like I said, it comes down to the data. If Amazon can actually go ahead and secure this deal, it’s going to provide them with boatloads more data about consumers homes and then fit that into the Alexa ecosystem.

SEANA SMITH: Well, Dan, what do you think this also tells us just about future M&A, right? I know we still don’t know what’s going to happen with the FTC here in the US, but if they in theory do get approval for iRobot, what do you then think that tells us just about some of the other acquisitions that could be lining up for Amazon down the road?

DAN HOWLEY: Yeah, I think when it comes to something like iRobot, it doesn’t feel as though this is, you know, such a massive potential market, right? I mean, sure, people want robot vacuums. There are other companies out there that produce robot vacuums, iRobot happens to be, you know, one of the largest names. Roomba is, I mean, synonymous with little robots in our house. And so I think that’s really something that people are focusing on here when it comes to this announcement.

But, you know, I don’t think it necessarily rises to the kind of level as something like we had seen with Microsoft and Activision Blizzard, right? Like that is such a massive deal and a massive company in that particular space in such an important space as far as the overall revenue globally that I think that obviously deserved that kind of scrutiny.

Now, when it comes to Roomba in iRobot, you know, to me it doesn’t seem as though it’s as important or as large of a market. But as I said, this comes down to the data. So I think it really comes down to what regulators see as far as the importance of this particular kind of data, and it seems as though, at least in the EU according to this report, they’re OK with it.