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Will This Be Apple's Biggest Mistake Since the Newton?

Rich Duprey, The Motley Fool

The Newton was Apple's (NASDAQ: AAPL) way of introducing the world to the personal digital assistant -- a phrase it coined -- which promised to transform how we viewed computing. No longer tethered to a desk, it would be our first taste of mobile computing.

Except it was a big failure. Completely messing up its key handwriting recognition feature, the Newton was lampooned until it was yanked from the market and discarded. It would be for others to come along and make PDAs a thing, at least for a little while. But now Apple seems poised to make another similar mistake, and once again it will be others who dominate the niche. This time, the niche is voice assistants for your home.

Amazon Echo on kitchen counter

Image source: Amazon.com.

In need of assistance

Amazon.com (NASDAQ: AMZN) and Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google are far ahead in the field of voice assistants, and Apple's failures are allowing them to sprint forward without any checks on their growth.

Amazon said the Echo Dot was the No. 1 selling product on the e-commerce site this Christmas, with all Alexa-enabled devices selling tens of millions of units worldwide. Google has said that ever since its Home Mini started shipping in October, it has sold more than one Google Home device every second.

It's clear the smart home is finally upon us, but one name that ought to be on this list, yet is conspicuously absent, is Apple's. Even though it's about to enter the market in a big way with HomePod, the missteps it's made along the way with the device may have hampered its ability to compete effectively, and one it is about to make may irreparably damage any chance it has of catching up.

Google Home Mini and Max

Image source: Google.

Stumbling out of the gate

Apple was supposed to start shipping the HomePod in December, ahead of the holidays, but in November, the company announced it was delaying the launch because "we need a little more time before it's ready for our customers."

As the saying goes, he who hesitates is lost, and while letting the competition beat it to the punch with their devices is bad enough, Apple is committing another forced error by also reportedly keeping the HomePod's ecosystem closed to developers.

My colleague Chris Neiger noted in October that while Amazon's Echo has thousands of apps available on the devices, and Google has hundreds, Apple has built a wall around its product that essentially has only one redeeming characteristic: Its voice quality is supposedly far better than the competition.

Not that Apple hasn't essentially gone solo before, but coupled with the delay in the HomePod's release, it has allowed its rivals to completely own the space. Amazon has flooded the market with Echo devices and now controls some 70% of the voice-enabled speaker market while Google reportedly has a quarter share, but that is growing.

The biggest loser

Despite the doom and gloom, Apple could still have a chance. Adobe Analytics says that voice assistants are not a widely adopted device, and consumers still need to be convinced they need one. Although once a consumer has an Echo or Home Mini in their home, it's not likely they will feel the need to purchase another one, there's still a large market yet to be tapped that could make up for Apple's early stumbles.

However, Apple looks to be making a mistake that will doom the HomePod to Newtonian status.

Apple's HomePod

Image source: Apple.

Where Amazon and Google cut the price of their devices to under $30 for the holiday season to entice as many people as possible to buy them, Apple remains steadfast in its determination to sell the HomePod for $350. Even at undiscounted prices, the competing products make for better values.

Sure, Apple has always charged a premium for its products without harming its business, and even the $1,000 price tag for the iPhone X isn't scaring away millions of smartphone buyers. But that's only because phones are seen as necessities, and their utility has fully evolved. If consumers were still trying to decide whether they needed a smartphone, or whether their existing clamshell device was sufficient, pricing it 10 times higher than the competition would dramatically limit the pool of customers. It would likely kill the product, and Apple risks doing that with the HomePod.

The also-rans

Having delayed the HomePod's release, Apple has given away any competitive advantage it might have had, and now both LG and Samsung are planning to introduce their own voice assistants this year, making the field even more crowded.

Right now, the market for voice assistants is a two-player race, and there's been nothing to indicate that Apple will alter that dynamic. From limiting its ability to play nice with others to delaying its introduction, and now possibly pricing itself out of the market, the HomePod could be Apple's biggest mistake since the Newton.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Adobe Systems. The Motley Fool has a disclosure policy.