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Alphabet Charged by Sono for Patent Violation, Files Suit

Zacks Equity Research

Alphabet’s GOOGL Google has reportedly been sued by Sonos, Inc. SONO for alleged patent infringement related to smart speaker technology.

Reportedly, the suit has been filed both in the federal Court of Los Angeles and U.S. International Trade Commission.

Sonos, which makes wireless home speakers, has accused Google that it has violated five of its patents. In addition, it claims that Google has unlawfully used its technologies that enable smart speakers to wirelessly communicate and synchronize with each other.

Notably, Sonos is seeking to block the sales of some of Google's products — including smart speakers and smartphones, among others — as well as collect financial damages.

Alphabet Inc. Price and Consensus

 

Alphabet Inc. Price and Consensus

Alphabet Inc. price-consensus-chart | Alphabet Inc. Quote

Will the Lawsuit Hurt Google Smart Speakers?

Alphabet’s Google has been gaining traction in the smart speaker market over the past few quarters with Home devices. Moreover, the company’s continued efforts to keep pace with Echo devices are strengthening its market position. Further, the company is well poised to rapidly penetrate into developing countries, driven by low-cost speakers and the ability to answer search questions quickly.

Per data by Canalys, the global smart speaker market grew at a rate of 44.9% to reach 28.6 million units in third-quarter 2019. While Amazon contributed 36.3% tototal shipments, Google accounted for 12.3% of market share in the third quarter.

Google is aggressively looking into deals with smart home gadget makers to further improvise Home devices. Moreover, the company’s improving AI techniques are benefiting Google Assistant skills, thereby enhancing the features of these devices.

The removal of certain important products might come as a huge blow to the company. Thus, it is crucial for the firm to reach a settlement with Sono, in case the lawsuit turns out to be legitimate.

Bottom Line

The smart speaker market is riding on growing proliferation of virtual assistants on the back of AI technology.

Per a report from Allied Market Research, this market is expected to reach $23.3 billion by 2025 at a CAGR of 23.4% between 2018 and 2025. Further, a MarketsandMarkets report shows that the market is anticipated to witness a CAGR of 34.4% between 2018 and 2023, and hit $11.8 billion by 2023.

With increasing adoption rate of smart speakers globally, Google is already facing competition in this market from companies like Amazon AMZN, Apple AAPL and Microsoft, which are also gaining traction.

Notably, Amazon holds the highest share in the global smart speaker market driven by robust features of Echo devices. Further, several device models of Echo with affordable prices continue to aid its market share. Moreover, improving Alexa skills are likely to modify the Echo features.

Apple, which had entered into this particular market in the beginning of 2018 with HomePod, has been gaining momentum in the smart speaker market with brand loyalty and expanding global footprint.

Therefore, these suits related to smart speaker technologies may further hurt Google’s competitive position in the long run.

Zacks Rank

Alphabet currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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