July 15 (Bloomberg) -- The Trilobite doesn't do corners. Forget about the stairs. And don't go barefoot in the vicinity of Electrolux AB's robotic vacuum cleaner. Yet the Swedish company, run by Chief Executive Officer Hans Straaberg, says more than 10,000 people have spent 1,500 euros ($1,700) each to buy one in less than two years, expecting the machine to clean their living room floor while they work or play.
Electrolux, caught in a price war with rivals such as Maytag Corp. and Whirlpool Corp., wants more devices like the Trilobite to revive earnings, which have dropped for three quarters. Second- quarter profit at the world's No. 1 maker of household appliances probably fell 20 percent before tax, according to a Bloomberg analyst survey. The Stockholm-based company reports on Thursday.
``If you're not different, then you're just a commodity,'' said Magnus Yngen, who heads Electrolux's floor care unit, during an interview in a model living room at the company's headquarters, a converted hospital on an island in Stockholm's city center.
Electrolux is cutting 5,000 jobs to save 415 million kronor ($51 million) a year by 2005. The money will be partly used to fund research into appliances such as the Trilobite, named after a creature that sucked scum from the ocean floor hundreds of millions of years ago.
The appliance industry is ``a mature market,'' said Tarkan Conger, who helps manage $3.5 billion at Kaupthing Bank HF. ``Electrolux constantly needs these new products to entice the customer. The Trilobite has been quite successful.''
Straaberg, who took over from Michael Treschow last year, has a personal interest in Trilobite's success. He used to head the floor care unit and was the manager of the Vaestervik plant where the Trilobite is made.
Electrolux says consumers are drawn to its 13-centimeter tall robot, which uses ultrasound and microphones to navigate around the room without running into the family crystal, because vacuuming tops the list of household tasks people claim they hate the most, along with ironing.
It needn't anymore. A Trilobite owner can turn the machine on in the morning before leaving for work and expect the robot, which saves enough power to return to its charging berth after a job, to clean the area and be nestled flush to the wall when he returns.
Electrolux says it expects 4 percent to 5 percent of the vacuum-cleaning public -- mostly double-income, urban families -- in Western Europe to be willing to buy the machine. While a Trilobite costs 1,500 euros, an Electrolux AEG vacuum cleaner sells for about 85 euros in Amsterdam.
``Only people that don't care about money will buy one,'' said Andreas Willi, an analyst at J.P. Morgan in London. ``Trilobite will never be a mass market product like a microwave.''
Right now, a more expensive model is what the company wants to help increase margins. Electrolux, which also makes Frigidaire and Zanussi appliances, has to cut costs by 3 percent a year in the U.S. to keep its profitability up to speed with rivals, according to J.P. Morgan. Retailers have been slashing prices to get more people to the check-out line. That causes profit margins to drop when manufacturing costs are not controlled.
While the Trilobite is not meant to be a mass market product, Electrolux is working on how to make successors at different prices. Some future models could be operated by remote control, which would make them pricier, or be manufactured in China to reduce their cost, Yngen said.
Electrolux isn't the only company aiming to get a bigger chunk of the more than $7 billion floor care market.
Closely held iRobot Corp. has come out with a $200 version in the U.S. Sales of the machine got a boost after U.S. talk show host Oprah Winfrey named it as one of ``Oprah's Favorite things for Spring.'' Dutch rival Royal Philips Electronics NV, whose domestic appliance unit is the company's most profitable, is working on its own answer to robotic housecleaning.
Does It Clean?
``Trilobite is a very nice product but at the price they are selling it, I wouldn't have dared,'' said Nico Engelsman, Philips's vice president for floor care. ``We've decided to spend more time on developing a machine that really cleans the floor.'' Philips plans to release a cleaning robot in 2006.
To be sure, Trilobite can't replace a household vacuum cleaner. Besides its problems with stairs and corners, it doesn't have as much suction power as other Electrolux models, Yngen said. The machine is designed to serve as a bridge between weekly deep cleanings.
It also isn't sold in the U.S., where Electrolux generates about 40 percent of its revenue, because carpets are thicker there and give the brush trouble, according to Yngen. The company is adapting the model for that market and plans to sell it there in the future.
``I wouldn't pay 1,500 euros for it, maybe 500 euros,'' said Dani Schooley, a software consultant for a pharmaceutical company in Amsterdam, who spent 80 euros on her current vacuum cleaner. ``What I really want is someone to clean my whole house for me. A real person.''
On the rug of Electrolux's model Stockholm living room, Yngen put the Trilobite to work. The robot set off and quickly entangled itself in a phone cord. The machine spun around for several minutes before navigating out of the quagmire. The phone stayed put on the shelf, the robot moved on and Yngen smiled.
A Trilobite owner shouldn't have even seen the near-fall, according to Yngen. You're not supposed to be home when it's on.
``We shouldn't be here watching it,'' Yngen said. ``We should be out playing golf.''