What's short, cute, and worth $90 million to Merrill Lynch, Pierce, Fenner & Smith Inc.

It's B.O.B.--an R2D2 lookalike that Androbot Inc. hopes will be the hottest thing to hit the consumer market since video games. B.O.B. (a moniker for Brains on Board) is a "personal robot."

"Can you envision a person with $500 in discretionary income who would buy a robot that could make your coffee in the morning, fetch the newspaper and guard the house at night?" asks Androbot's president, Tom Frisina.

Of course, he says. Unfortunately, Frisina concedes, B.O.B. can't do any of those things yet at even twice that price. But it may not matter in a stock market fascinated by high technology.

In fact, none of Androbot's robot family--F.R.E.D. (for Friendly Robotic Educational Device), Topo--a robot extension for personal computers--and AndroMan, a robot that links to the Atari game unit, have yet to find their way into the marketplace.

Since its creation in late 1981, Androbot has grossed less than $50,000 while losing more than $1.3 million in start-up costs. Despite this, the San Jose-based company issued a preliminary prospectus early last month announcing its intention to go public. Underwritten by Merrill Lynch, the company is offering 1.5 million shares--representing about 20 percent of its equity--for between $10 and $12 a share. That means Androbot Inc. is perceived to be worth somewhere close to $90 million.

This valuation has prompted raised eyebrows and a quiver of incredulity from various quarters of the venture capital and investment communities. "I think taking a company public in the consumer electronics industry that has no revenues and no product is crazy," says a respected venture capitalist.

"There seems to be more perfume than substance," says Fred Adler, a venture capitalist, "but Merrill, Lynch is an underwriter, not an insurance company. Provided it makes total disclosure, there's nothing illegal or immoral in putting out the shares on a speculative basis."

Actually, say industry observers, the real reason Androbot enjoys a high valuation isn't because of B.O.B. or the idealized potential of home robots. It's because Androbot's "father" is Nolan Bushnell, the entrepreneur who founded Atari, the giant video games and personal computer company, and Pizza Time Theater, a fairly successful chain of family entertainment restaurants.

"Bushnell has had a remarkable record of success," says venture capitalist Adler. "The bet for the investor in this thing is that Bushnell will somehow make it work."

Even Merrill Lynch concedes that it isn't the typical high-tech public offering. "The list of those companies with Androbot's financial background is not particularly long," says Tom Stephenson, a corporate finance associate in Merrill Lynch's Emerging Company Group. However, he insists, "We believe all their products have the possibility of selling at a profit over time."

Still, Androbot's Frisina agrees, "There is a good deal of risk in the venture. Thus far we've not been able to demonstrate much beyond getting the robot on the cover of magazines and people saying 'ooh' and 'ahh' and promising to buy one if it can do something."

Currently, B.O.B. and friends are still fairly primitive prototypes. In fact, B.O.B. is really less of a personal robot than a hobbyist's plaything, according to Androbot. At this point, B.O.B. can be programmed to recognize and utter a few simple phrases and can be made to wander around a room without bumping into things.

A homeowner's B.O.B.--one that could begin to earn its tails as a valet--might not be seen until the end of the decade, if ever. The company, according to the prospectus, is still in its "development stage." But it is the potential for success when developments are refined, says Frisina, that merits Androbot's stock value.

"That's not based on the value of the company today," he says, "but in three or four years. There indeed is going to be a huge business in personal robots equal to, if not exceeding, personal computers."

One prominent underwriter says that the Androbot offering is a sign that the rapidly growing initial public offering market is now embracing the more speculative offerings.