Reportedly, Apple AAPL has slashed HomePod prices by almost 15%, globally. Per 9 to 5 Mac, the smart speaker is now available at $299 (down $50) in the United States.
The latest price cut is expected to boost Apple’s competitive position in the smart-speaker market currently dominated by Amazon AMZN and Alphabet GOOGL division Google.
Per Strategy Analytics’ fourth-quarter 2018 data, Amazon led the global smart-speaker market, trailed by Google. Alibaba BABA was placed third, followed by Baidu BIDU, Xiaomi and Apple.
Amazon and Google gained from strong demand for low-cost Echo Dot and Home Mini speakers. Both companies recorded sequential increase in market share.
The firm believes solid demand for smart speakers in China, where Amazon and Google do not have a presence, benefited Alibaba, Baidu and Xiaomi, pushing the companies to the top six. However, Apple’s market share had declined.
Price Cut to Help Apple Gain Market Share
Apple has failed to gain a strong foothold in the smart-speaker market owing to its late entry and hefty price point. While HomePoad was launched last February, Alibaba’s Tmall Genie, Xiaomi’s Mi AI Speaker and Amazon Echo were rolled out in 2017. Google Home was introduced to the market in November 2016.
Moreover, HomePod’s price tag was heftier than Echo and Google Home, available at $99 and $130, respectively. Further, Google and Amazon have lower-cost devices like Google Home Mini and Amazon Echo Dot, both of which are priced at $49.
One-Year Price Performance
Although Apple’s latest price cut doesn’t close the gap much against these devices, it can be effective in aiding HomePod’s popularity.
HomePod dominates the premium market (above $250) and its superior sound quality is praiseworthy. Notably, Google's Home Max is a device in the same category ($399).
Apple also scores better with its regional language support in China, which the other two behemoths, Amazon and Google, apparently lack.
Apple is now rumored to launch HomePod 2. It is also speculated that this Zacks Rank #3 (Hold) stock will integrate Face ID with a new HomePod. Apple may also launch a smaller and cheaper version of HomePod, per Macworld.
Amazon Racing Away, Google Keeping Pace
The emergence of virtual assistants embedded with AI techniques continues to fuel the demand for smart speakers. Rapid proliferation of virtual assistants and improving AI skills are aiding these speakers to become more advanced with each passing day. This is likely to boost the adoption rate of smart speakers further in every possible sectors starting from residential homes, smart offices, automobiles to hospitals.
Both Amazon and Google are benefiting from this trend. Although Amazon still dominates the smart-speaker market, Google is narrowing the gap, as reflected by the below chart from Canalys.
Amazon’s efforts to expand features of Echo devices, improving Alexa skills and affordability are key catalysts. Alexa Skills Store offers more than 80,000 skills. Furthermore, customers can now access Apple Music’s library of 50 million songs on their Echo devices.
Amazon is racing to build an ecosystem around Alexa and it’s safe to say that it has taken an early lead over Google’s smart assistant and Microsoft Cortana.
Nevertheless, Google’s continued efforts to keep pace with Echo devices by partnering smart-home gadget makers, as well as improving AI techniques, which are expanding Google Assistant’s skills, are notable.
While Google parent Alphabet has a Zacks Rank #3, at present, Amazon 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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