Sonos files for IPO, highlighting profitability but also risks it faces with Apple, Google, Amazon

Sonos has filed to go public while seeking to position itself for a grueling fight against some of tech’s biggest names.
Somewhat awkwardly, those deep-pocketed competitors also happened to be a few of the smart home speaker company’s most critical partners: Apple, Google, and Amazon.
The filing today is preliminary, and it doesn’t say how much Sonos plans to raise in the offering.
“Sonos sits at the intersection of emerging trends driving the future of home entertainment,” the filing says. “The proliferation of streaming services and the rapid adoption of voice assistants are significantly changing audio consumption habits and how consumers interact with the internet. As the leading home sound system for consumers, content partners, and developers, Sonos is poised to capitalize on the large market opportunity created by these dynamics.”
Founded in 2002, Sonos built a passionate following of customers who wanted higher-quality speakers that were also easy to use and that could eventually be controlled via their smartphones.
But the company missed the shift to voice-controlled smart speakers after Amazon launched the Alexa-enabled Dot and Echo. That launch was later followed by Google Home with Google Assistant baked in. Earlier this year, Apple belatedly launched its Siri-controlled HomePod.
In response, Sonos has been upgrading its speaker lineup with Alexa functionality. Later this year, the speakers will also connect to Siri and Google Assistant. And last fall, the company introduced Sonos One, its very own smart speaker.
In terms of good news, Sonos says that for the first six months of its current fiscal year, revenue jumped $100 million to $655.7 million, driven in large part by a 29.2 percent increase in the number of units sold. The company adds in its security filing that this growth was largely driven by sales of Sonos One.
Sonos also turned profitable during those six months, after having posted a series of decreasing losses over the previous three fiscal years. That profitability is helped by the fact that Sonos customers tend to keep buying the company’s products after they purchase their first speaker, the filing says.
However, Sonos’ filing comes with some big red flags.
Streaming services are among the biggest uses for Sonos speakers. And one of the most popular such services is Apple Music, along with Google and Amazon’s respective music services. Sonos says the freedom it offers confers a big competitive advantage.
“These partners find value in our independent platform and access to millions of desirable and engaged customers,” the filing says.
But Sonos also notes that it faces fierce competition from these same partners, who can write much bigger checks.
“In some cases, our competitors are also our partners in our product development and resale and distribution channels, and while the presence of these competitors in the market has increased consumer awareness of products and contributed to the growth of the overall market, their resources and brand recognition pose significant competitive challenges,” the filing says. “We expect competition to intensify in the future as more companies enter these markets and consumer demand for internet-based delivery of audio content to increase.”
Based in Santa Barbara, Sonos has 1,478 full-time employees.
Source: VentureBeat