Enterprise technology giant Zebra Technologies Corp. is looking to bolster its presence in the industrial robot industry, announcing its intention today to acquire startup called Fetch Robotics Inc. for $290 million.

The acquisition, which is still subject to customary closing conditions, is expected to close by the third quarter.

Zebra is a massive enterprise technology player that often flies under the radar, despite generating more than $4 billion in annual revenue. A member of the Fortune 500, Zebra sells technology to customers in the manufacturing, supply chain, retail and healthcare industries. Its products include various ruggedized mobile devices, thermal barcode label and receipt printers, RFID smart label printers and encoders, handheld readers and antennas, card and kiosk printers, and specialty printers, plus the software needed to run them.

The company is also into robotics. It already owns a 5% stake in Fetch through an earlier investment in the firm, and today’s deal will see it acquire the other 95%. Zebra has its own retail robotics products too, such as its SmartSight inventory system. And it has a stake in other robotics firms, such as Locus Robotics Inc., having taken part in that company’s $40 million Series D funding round in June 2020.

Fetch builds autonomous warehouse robots that work in fulfillment centers. The company has designed about a half-dozen machines that serve different roles in warehouses. For example, its flagship VirtualConveyor bots are wheeled systems that move items around big warehouses. They can transport pallets and carts of goods and stack them or transfer them to conveyor belts. They can also fetch items for human workers.

Besides that, Fetch sells robots for artificial intelligence research, in addition to an inventory-taking machine called TagSurveyor that works by scanning items on warehouse shelves to create an up-to-date list of what’s there. Fetch also developed robots capable of disinfecting work areas during the early days of the COVID-19 pandemic.

The main selling point of Fetch’s robots is that they perform lots of manual tasks that would otherwise be done by humans. Big logistics firms, including DHL International GmBH and Universal Logistics Holdings Inc., have already taken notice and are using Fetch’s robots in a number of roles.

Fetch has also worked directly with Zebra in the past. In early 2020 the companies announced a partnership, integrating Zebra’s Fulfillment Edge software with Fetch’s robots. The companies said today that Fetch is “generating annualized run-rate sales of approximately $10 million.”

Zebra said that by acquiring Fetch, it will be able to integrate technology to connect human workers with robots, tools such as handheld scanners, and software that directs the flow of distribution, manufacturing and retail operations.

Zebra Chief Executive Officer Anders Gustafsson said acquiring Fetch will help his company to accelerate its vision of enterprise asset intelligence and its growth in intelligent industrial automation. “This move will also extend our ongoing commitment to optimize the supply chain from the point of production to the point of consumption,” he added.

Fetch co-founder and CEO Melonee Wise is one of the biggest names in the robotics industry, having previously led Unbounded Robotics, which shut down in 2014 despite developing what many said was a promising UBR-1 single-armed mobile robot. Wise said that by joining Zebra, Fetch will be able to speed up adoption of its robots and its cloud-based robotics software platform.

“Together we have the right team with the right technology to provide end-to-end solutions that solve real customer problems,” Wise said. “By helping customers dynamically optimize and holistically orchestrate their fulfillment, distribution and manufacturing operations, together we help enable their ability to stay ahead of growing demand, minimize delivery times and address shrinking labor pools.”

While the companies seem to be a natural fit on the surface of things, shareholders may wonder how sensible such a deal really is, said analyst Holger Mueller of Constellation Research Inc. He conceded that the acquisition makes sense from the perspective that robots will undoubtedly become much more common in warehouses and the retail sector in future, displacing humans, but he explained that it makes far less sense if looked at from the perspective of investors that typically seek short-term gains.

“Hardware margins, even for advanced robots like what Fetch builds, are typically much lower than software margins,” Mueller said.”This acquisition will therefore likely be margin-dilutive, and that’s not something investors normally like to see. Zebra executives will need to convince shareholders how advantageous this deal really is, otherwise they’re likely to express their disappointment.”

The acquisition follows a wave of investor capital that has poured into the robotics market over the last couple of years. One of Fetch’s biggest rivals in fulfillment center robotics, Berkshire Grey Inc., raised $263 million in funding in January 2020. That was followed by a $36 million raise for Brain Corp., which makes autonomous software for cleaning robots, in April 2020. One month after that, AI robotics startup Covariant raised $40 million in a Series B round of funding.

More recently, in February, an AI-powered industrial robotics startup called Symbio Robotics Inc. exited stealth mode with $30 million in investor funds. It builds robotic systems and software that aims to modernize industrial manufacturing processes. Its tech can even be retrofitted onto existing robots to make them faster, smarter and more flexible.

That said, robotics is not always easy. For all the funding that has poured into the market, there have been several notable failures too. In addition to the demise of Wise’s first startup, SoftBank Group Corp. recently announced that it was stopping production of its famous Pepper Robot. And Boston Robotics, which was once owned by Google LLC parent Alphabet Inc., has been sold a couple of times as it struggles to commercialize its robotic systems.

Photo: Fetch Robotics