Are Intuitive Surgical and iRobot Just Babies?
By Jack Uldrich
November 20, 2006
All across the United States, avid video gamers have been standing in line and, in many cases, camping overnight outside Best Buy (NYSE: BBY) and Wal-Mart (NYSE: WMT) stores in order to be the first in line to purchase Sony (NYSE: SNE) and Nintendo's (OTC BB: NTDOY.PK) latest video games -- the PS3 and Wii.
Imagine standing in line for Pong
As I reflected on this madness, I couldn't help but hearken back to my own video gaming days and recall with some fondness how I used to battle my brother in Pong on my family's old black-and-white TV console.
It is amazing to consider that the technology has now progressed so far that grown men are willing to camp out overnight in sub-freezing temperatures to buy video games. The gaming industry is now larger than all of Hollywood. Moreover, the thirst for new products is so great that many of the country's top colleges and graduate schools are offering courses in video game design to meet the demand.
Such is the nature of technological progress, I guess.
But as I reflected on this extraordinary progress, my mind wandered to a different field: the emerging robotics industry. This past weekend, I came across a couple of articles that made me think that, relatively speaking, robotic technology today is about where the video game industry was 30 years ago -- when Pong was all the rage. That is to say, it is just in its infancy.
But as with video games, robots' upward projectory seems pretty clear: They are only going to get better and better. And this is why I agree with the Motley Fool Rule Breakers staff that both Intuitive Surgical (Nasdaq: ISRG) and iRobot (Nasdaq: IRBT) are two investments that have extraordinary upside potential.
Is there a small doctor in the house?
To explain my optimism, I will refer to the two articles I read this weekend. The first came compliments of CNET, and it reported how the Israeli military is now integrating nanotechnology into "bionic hornet" robots that it hopes will be able to fly into enemy strongholds and clandestinely video record activity within the next three years.
The article didn't specify whether nanotechnology was in advanced computer circuitry, new materials, laser technology, photonics, or perhaps all four. But I am confident that as the field of nanotechnology continues to improve, it will help make robots better, faster, smarter, cheaper, and smaller. And as it does this, there is every reason to believe that the number of uses for such miniature robots will increase. One of the more obvious areas is surgery. If Intuitive Surgical is already doing 35% of all prostectomies and has plans to move into hysterectomies, why can't it branch into other types of surgery as well?
Robot, heal thyself
The second article, from Reuters, discussed how researchers in the U.S. are teaching robots how to adapt to new situations. I liken such advances to the learning curve of a young baby. During the early stages of an infant's brain development, the number of neural connections it forms grows rapidly, allowing the baby to grasp new concepts. Similar to this are the software programs that are allowing robots to perform at ever-higher levels, improving rapidly.
Today, human babies have capabilities -- like voice and pattern recognition -- that are beyond the scope of even the best robots. But as robots get better and "learn how to learn," this difference will diminish. For instance, according to the article, consider that researchers have already developed a military robot which, if it has a leg blown off in combat, can adjust itself automatically and learn how to walk with only three legs.
The implications of such progress are astounding. I have written before about the huge emerging market for military robots. As robots, which are already searching out and detecting roadside bombs, learn how to adjust to new environments in places like Iraq and Afghanistan, and then become capable of reconfiguring themselves if injured, it is clear that they could become a larger and more potent component of future fighting forces worldwide.
Just imagine the other markets that will also become available as robots learn to adapt to harsh conditions, such as those deep under the ocean or in outer space. The market for robotic technology to help companies such as Royal Dutch Shell (NYSE: RSD-A) and ExxonMobil (NYSE: XOM) search and drill for oil would be extraordinary.
Foolish final word
My point is that while I think it is easy to dismiss robots like iRobot's Roomba or Scooba as cute little home accessories, or to think that Intuitive Surgical's da Vinci robot will always be limited to prostectomies and hysterectomies, I believe that would be the equivalent of dismissing Pong 30 years ago as just a cute little game with no real potential.
The underlying enabling technology of robots -- the computers, sensors, lasers and software -- is getting progressively better. And as it does, today's robotic "babies" --which are being developed by companies such as iRobot and Intuitive Surgical -- will move from a crawl to a walk and then a sprint.
As with parenting, the best time for investors looking to bond with a company and forge a meaningful and fulfilling relationship is when that company is young. Sure, there can be some growing pains, but the long-term benefits can be very rewarding. |
