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

Sonos, maker of smart home speakers, has filed to go public as the company seeks to position itself for a grueling fight ahead against some of tech’s biggest name.

Somewhat awkwardly, those deep-pocketed competitors also happened to be some of Sonos’ most critical partners: Apple, Google, and Amazon.

The filing today is preliminary, and 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 people who wanted higher-quality speakers that were also easy to use, and eventually could 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 was later followed by Google Home, with Google Assistant baked in. And earlier this year, Apple belatedly launched its Siri-controlled HomePod.

To counter, Sonos has been upgrading its speaker lineup with enable Alexa functionality. And later this year, they will also connect to Siri and Google Assistant. And last fall, the company introduced Sonos One, its very own smart speaker.

The good news for Sonos is that it says for the first six months of its current fiscal year, it saw revenue jump $100 million  $655.7 million, driven in large part by 29.2 increase in the number of units it sold. And it says in its security filing that growth was largely driven by sales of Sonos One.

The company also turned profitable during those six months, after posting a series of decreasing losses over the previous three fiscal years. That profitability is helped by the fact that Sonos customers tend to continue expanding the number of the company’s products in their homes after they buy their first speaker, the filing says.

However, Sonos’ filing comes with some big red flags.

One of the big uses for Sonos speakers is streaming services. And one of the most popular is Apple Music, while Google’s and Amazon’s music services also work with the speakers. Sonos says that freedom is a big competitive advantage.

“These partners find value in our independent platform and access to millions of desirable and engaged customers,” the filing says.

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 market and consumer demand for internet-based delivery of audio content to increase.”

Based in Santa Barbara, the company has 1,478 full-time employees.

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