A New Robotic Horde Means Big Business for iRobot (Nasdaq: IRBT)

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Don't let the recent sell-off in iRobot Corp. (Nasdaq: IRBT) shares get you down about robotics.

The truth is, this small-cap robotics leader just reported record results for 2011.

Shares of iRobot only fell when the company warned that tight defense budgets could curb sales of "warbots" until the second half of the year.

iRobot investors who are concerned that the drubbing is a reason to worry about the future of this industry are making a very big mistake.

Here's why.

An Asian electronics firm alone will field nearly 1 million new robots in less than five years. And in a moment I'll give you the details behind this robotic horde....

But first I want to make sure you know why I'm so bullish about this emerging high-tech field.

After all, in the Era of Radical Change, robots and other smart machines will transform the world in ways we still don't fully understand.

A Robotic Leap Forward

I realize that robots have been around for at least 30 years in factories. I actually saw some of the earliest versions in use at a General Motors Co. (NYSE: GM) plant in the early 1980s.

But today, the robotics industry continues to register one advance after another...

You see, we've reached critical mass in key areas. Today we have better software, chips, programming, and artificial intelligence.

All these high-tech advancements add up to a new generation of robots that can perform highly complex jobs.

Now, even low-cost Chinese workers who steal jobs from Americans face pressure from this new generation of "workerbots."

Just ask the workers at Foxconn International Holdings Ltd., a firm based in Taiwan that makes products for big computer firms.
You see, Foxconn became a global brand supplying such tech stars as Apple Inc. (Nasdaq: AAPL), Dell Inc. (Nasdaq: DELL) and Hewlett-Packard (NYSE:HPQ).

Foxconn's robots will replace roughly half the firm's 1.2 million workers in China. Anyone who follows high tech needs to watch this trend as it unfolds over the next three to five years.

The Foxconn program is the most ambitious roll-out of robots ever tried. No one has gone from 10,000 robots to 1 million in such a short period of time.

Even that understates the sheer scale of Foxconn's move. To see how, let's look at some stats from the International Federation of Robotics.

According to this robotics trade group, only about 1 million industrial robots are now in use around the world. So, Foxconn alone will double the number as it works to automate its factories.

Just that fact shows you how far robots have come in a short time. Gone are the days when a bot did only a few very simple tasks on the shop floor.

Robots and Modern Medicine

Today's robots can actually beat humans in highly complex jobs - some of which are found in the modern operating room.

As it turns out, the FDA recently approved using robots to restore hair for balding men.

Restoration Robotics is marketing the ARTAS system that harvests follicles from one part of a man's body to re-grow the hair on his head.

The ARTAS system features imaging software that finds healthy hair and a robotic arm that removes it.

It isn't cheap. In early January, the The New York Times said the surgery lasts four to eight hours and costs $12,000 to $15,000.

But with millions of men going bald, it's a potentially huge market.

Meanwhile, Intuitive Surgical (Nasdaq: ISRG) still remains the world leader in using robots to perform complex surgery less invasive than what a human can do with a scalpel.

The firm's da Vinci system uses four robotic arms and 3-D imaging to help doctors better control operations. Today, the system is used in more than 1,450 medical centers.

The iRobot Warrior

For its part, iRobot recently launched a new robot for the military called the Warrior.

It looks like a mini-tank with a big robotic arm and can perform a wide range of tasks.

One of them includes shooting weapons - at least in tests. An online video hosted on YouTube shows the Warrior firing at a target.

You can just imagine where the Warrior could take us in the battles of the future...

These "warbots" could shoot machine guns, fire rockets, toss grenades and also track enemy troops through sophisticated sensors.

I predict that in the near future, robots will play a much larger role in combat.

So, even though iRobot's stock got hammered on fear of defense cuts, don't ignore the robotics field.

Because even though robots first came into use decades ago, they're just now hitting their stride.

We are in the very early stages of an exciting new industry - one that will yield lots of chances to find investments that take advantage of these breakthroughs.

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About the Author

Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.

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