COMMENT: Sonos Set To Be Carved Up, A High Risk Investment
You only have to look at the GoPro debacle to realise that an investment in Sonos, who are desperate to get an IPO away, is extremly high risk.
Like Sonos, GoPro was first out of the gate with a product that the market loved, that was until their competitors worked out how to deliver a cheaper and often better product, now GoPro is struggling, and it appears that the only winner was their CEO Nick Woodman who pocketed over $300 million when the Company went public.
This year Woodman, will receive no more than $1, after GoPro’s board slashed his salary and stripped him of his bonuses after losses jumped by 56 percent to $182.9 million.
Sonos like GoPro was an early pioneer, while GoPro was developing the ruggedised camera Sonos directors who were ex Intel audio engineers were developing the first networked audio sound system. At first the Company struggled and then suddenly it goes traction.
They had the market to themselves and product flew off the shelves for the simple reason that the sound was good, their software was ahead of the market and networked audio was in it’s infancy.
In 2017 the Company is heading for a listing, it comes as their competitors deliver superior sound systems and brands such as Amazon, Google and Apple along with some major Hi Fi manufacturers look to take Sonos on with superior voice activated system sound systems.
Recently the Company launched a cheap Sonos sound system and it’s only just been upgraded to work with Alexa Voice.
The only problem is that new products such as the new Ultimate Ears 360-degree speaker that also works with Alexa Voice deliver superior sound to the Sonos One along with full network capability.
Sonos is a 16-year-old company that has seriously peaked, and I suspect, that their pending strategy to take the Company public is more about investors and directors getting their money out than the Company being a booming success going forward.
At the recent Hong Kong Fair, I saw at least 10 networked audio products that were delivering superior High Res sound to what Sonos systems are delivering today.
Some analysts are valuing Sonos at US$3bn, with the Company hoping to raise around $200m from the IPO, which could happen as soon as June. For Sonos, sooner is the better option as there are several stunning new networked audio products planned for release in the second half of the year, these products are made by some of the biggest Hi Fi Companies in the world whovhave now worked out how to deliver superior networked Hi Fi and voice activation.
Brands such as JBL, Harman Kardon, Bluesound and Denon are now moving onto the second-generation networked audio products and while Sonos has primarily had the networked audio market to themselves these brands have worked out how to strip share away from, Sonos.
Sonos is also going to have to compete in a brutally competitive market where a sound product is the means to instructions to networked products in the home.
The demand for music streaming services such as Spotify and Apple Music; advances in voice-activated audio devices from brands such as Amazon’s Alexa and Google Assistant; and the “connected home”, where anything from door locks to light bulbs are being hooked up to the internet and can be activated using voice commands from a sound system are what are going to sell.
Sonos who has become extremly arrogant with both retailers and the media are heading in the same direction as GoPro/
The popularity of Amazon’s Echo, which has sold tens of millions of units, presents a challenge Sonos who is forced to emulate what Alexa can do. Those who buy an Amazon or Google audio product get a native version of Alexa or Google Voice.
Sonos’ response is to position itself as a neutral “Switzerland” the only problem is that Sonos is now peddling backwards as other brands peddle forward.
Its Sonos One device is compatible with both Alexa and Google Assistant, while its speaker’s other speakers are stuck in 16Bit mode as the market moves to 24Bit.
Last year, Sonos founder John MacFarlane stepped back to allow former BlackBerry manager Patrick Spence to take over as chief executive.
In February, Mr MacFarlane said on Twitter that it was “hard to answer” whether he recommended Apple’s HomePod or Sonos.
The HomePod “handily beats a single Sonos One, at full, acoustically,” he said.
Another, heads up that Sonos is not the Company to invest in was revealed last year when the company started laying off ‘an unspecified number’ of employees.
Then suddenly founder and CEO John MacFarlane abruptly stepped down from a day to day role in the Company.
In his final statement as CEO, co-founder John MacFarlane admitted that his company faced “stiff competition.”
Really, now they want people to invest in a Company that could with 24 months be a total train wreck like GoPro and brands like Nokia and Blackberry, who after carving the market up with a unique product, were themselves carved up by superior competitors.