iRobot 2010 Annual Report Download - page 55

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January 2, 2010 and December 27, 2008, our research and development expenses were $24.8 million, $14.7 million
and $17.6 million, respectively. In addition to our internal research and development activities, for the years ended
January 1, 2011, January 2, 2010 and December 27, 2008, we have incurred research and development expenses under
funded development arrangements with governments and industrial third parties of $27.1 million, $30.8 million and
$23.9 million, respectively. Of our total research and development spending in 2010, 2009 and 2008, approximately
50.4%, 63.9% and 51.7%, respectively was funded by government-sponsored research and development contracts. For
the years ended January 1, 2011, January 2, 2010 and December 27, 2008, the combined investment in future
technologies, classified as cost of revenue and research and development expense, was $51.9 million, $45.5 million
and $41.5 million, respectively. We intend to continue our investment in research and development to respond to and
anticipate customer needs, and to enable us to introduce new products over the next few years that will continue to
address our existing market sectors.
Our research and development is conducted by small teams dedicated to particular projects, examples of which
include the Roomba team, Scooba team, Warrior team and PackBot team. Our domestic research and development
efforts are primarily located at our headquarters in Bedford, Massachusetts, our office in Durham, North Carolina,
and our special projects engineering office in San Luis Obispo, California.
Our research and development efforts for our next-generation products are supported by a variety of sources.
Our next-generation military products are predominately supported by U.S. governmental research organizations.
Government funding is provided to further the development of robot technologies with the expectation that if the
projects result in the development of technically viable prototypes, the government will purchase multiple
production units for future use in the field. The government funding that we receive allows us to accelerate the
development of multiple technologies. While the U.S. government retains certain rights to military projects that it
has funded, such as the right to use inventions and disclose technical data relating to those projects without
constraining the recipient’s use of that data, we retain ownership of patents and know-how and are generally free to
develop other commercial products, both consumer and industrial, utilizing the technologies developed during these
projects. The rights which the government retains, however, may allow it to provide use of patent rights and know-
how to others, and some of the know-how might be used by these third parties for their own development of
consumer and industrial products. Similarly, expertise developed while designing consumer products is used in
designing products for government and industrial applications. We also work with strategic collaborators to develop
industry-specific technologies.
Competition
The market for robots is highly competitive, rapidly evolving and subject to changing technologies, shifting
customer needs and expectations and the likely increased introduction of new products. We believe that a number of
established companies have developed or are developing robots that will compete directly with our product
offerings, and many of our competitors have significantly more financial and other resources than we possess. Our
competitors include developers of robot floor cleaning products, developers of small unmanned ground vehicles,
established government contractors working on unmanned systems, and developers of small unmanned underwater
vehicles.
While we believe many of our customers purchase our Roomba floor vacuuming robots and Scooba floor
washing robots as a supplement to, rather than a replacement for, their traditional vacuum cleaners and wet floor
cleaning methods, we do compete in some cases with providers of traditional cleaning products.
We believe that the principal competitive factors in the market for robots include product features, perfor-
mance for the intended mission, cost of purchase, total cost of system operation, including maintenance and
support, ease of use, integration with existing equipment, quality, reliability, customer support, brand and
reputation.
Our ability to remain competitive will depend to a great extent upon our ongoing performance in the areas of
product development and customer support. We cannot assure you that our products will continue to compete
favorably or that we will be successful in the face of increasing competition from new products and enhancements
introduced by existing competitors or new companies entering the markets in which we provide products.
9
Form 10-K