Apple should ponder acquiring Sonos in a move to tackle the home audio networking market, a small niche with big potential, according to an analyst.
That's the takeaway from a research note penned by William Blair analyst Ralph Schackart. The report makes a lot of sense. The logic goes like this:
- Apple should enter the home audio networking market to extend iTunes and provide subscription services;
- Sonos would round out Apple's lineup;
- There's a lot of headroom in the home audio networking market.
The home audio market is just 1.6% of the $170 billion-plus consumer electronics (CE) end-market. In our view, the market is underdeveloped and existing products are too focused on the audiophile and aficionado market to become mainstream. We believe Apple has the potential to transform this market the same way it transformed the portable mp3 player market, growing it from nascent niche to a new product category.
And to enter that category, Apple should scoop up Sonos.
If Apple enters the home audio networking market, we believe it may consider buying Sonos. In our view, Apple could quickly integrate Sonos and roll out Apple-branded HAN devices, reducing the time to market compared with building its own internal solution.
Sonos is privately held. The company's wireless networking gear distributes iTunes and other services like Pandora and Sirius XM throughout your home. If Apple bought Sonos, Schackart reckons that the market is worth an additional $2 a share in earnings to the company.
In addition, the move makes a lot of sense for Apple's digital living room plans. Apple has been trying to take over the living room via video, but audio is a more natural fit in many respects.
We believe Apple ultimately wants to secure a position in the digital living of the future. While Apple TV so far has had limited success, the HAN market is another opportunity for Apple to expand beyond its existing product lineup (Macs and portable devices) and secure a position in the digital living room, in our view. Moreover, this product requires multiple points of presence for Apple to further invade consumer homes.
Picture the iPod and iTunes riding shotgun with Sonos' gear:
Would an Apple purchase of Sonos make sense?