A tough week for hardware companies

Within about a week, Any robot, It shinesand Rad Power Bikes They all filed for bankruptcy.

They’re very different companies — selling Roombas, lidar, and e-bikes, respectively — but as Sean O’Kane, Rebecca Bellan, and I discussed in an episode Stock podcastThey have faced some similar challenges, including tariff pressures, major deals that have fallen through, and a failure to establish themselves beyond the products that initially made them successful.

You can read an edited preview of our conversation below, where Sean gives an overview of each filing, Rebecca asks if she has a Roomba, and I speculate on what popular narratives about these bankruptcies leave out.

Shawn: Rad Power is big for an e-bike company, but small, I think, in most people’s minds, since this is still a fairly niche niche. They’ve been established for a long time and had become popular even before the pandemic, and were really seen as an industry leader, in terms of the quality of bikes they make, the branding, very good marketing and trying to connect with customers – something that’s really hard to find in the e-bike world, where most of them are just like alphabet soup companies on Amazon.

They rode that wave in the pandemic high with micromobility really taking off, people were really rethinking how they commuted, and they weren’t commuting to the office as much. We get glimpses of this in bankruptcy filings. It only shows revenue from three years ago, but they had over $100 million in revenue in 2023 – like $123 million, I think it was down to about $100 (million) last year, and during the bankruptcy this year, it was only at about $63 million, so obviously it was coming down from a very significant high. They have a very diverse product portfolio, but have never found a way to establish a foothold there.

And I think you could say similar things about these other two companies. Luminar is another company that was founded in the early 2010s, and came out of the stealth world in 2017, and its mission was basically to use lidar sensors, which at the time were really expensive and big and were only used in defense and space applications. 2017 was kind of the first big hype cycle for autonomous vehicles. They wanted to apply those sensors, and make them accessible to everyone for that use case. This helped them get some deals, most notably with Volvo, and then some other deals with Mercedes-Benz, and a couple of other players. But they were very focused on that, and that was one of the reasons they had to apply this week as well.

And then iRobot was (was) the most popular of these three companies – a lot of people listening probably have a Roomba at home or something very similar to it. It’s just another one of those situations where iRobot becomes synonymous with a certain thing, and then the progress in the technology that builds that product moves so quickly that they end up in a situation where they were looking for a way out. And we’ve all seen this, they were trying to acquire Amazon, this deal was blocked by the FTC, and here we are.

They are very different companies, but they all faced similar problems. Do any of you guys have a Roomba?

Rebecca: No, I don’t have a Roomba. It scared me, but I bought my mom a Rad Power bike years ago, and she loves it. But now, you know, not only did they have this bankruptcy problem; The problem is with the batteries – They couldn’t do their recalls because they were saying, “If we have to recall these bikes, we’ll go bankrupt.” But they will go bankrupt anyway!

I’m curious about the tariff issue, and how that will impact everyone’s bottom line. You hear a lot on social media, about pro-merger people, about how the FTC banning mergers leads to companies going bankrupt, or being acquired by a Chinese company instead of an American company.

Shawn: iRobot, to me, represents kind of a macro global trade problem, could you have built this company here in the US with a local supply chain over the last 15 years? Maybe not. So it stands to reason that they have become too reliant on China – which, let’s be real, may have led to these other companies being able to come up and copy what they did.

This reminds me of Trump 1, when he flipped on tariffs on Chinese imports, and we saw a bunch of startups like Boosted Boards and other companies in the micromobility space getting hit. So they are definitely contributing factors. I think calling out the battery with Rad Power was a bigger dagger in the end, but the tariff stuff put them on even footing which made it harder for them to respond to things like that.

Anthony: Often when a company fails, there are larger structural issues, and therefore perhaps a more pressing problem. Especially in the case of iRobot, I think a lot of former executives and even outside commentators are as well Pointing to this Amazon deal That was reached a few years ago – it looked like the EU wasn’t going to let it go through, and there’s a feeling that, ‘Well, well, by blocking this deal, you’re putting the dagger in their heart that ultimately killed the company.’

Perhaps this narrative also ignores the fact that there were other things that made them want to obsess over it in the first place.