Jordan O'BrienThose wishing to invest in the smart home market received two new options this week, as both Sonos and Arlo have officially had their initial public offering. The two firms are facing increased competition from bigger names such as Amazon and Google, and the money that an IPO can raise will go some way towards ensuring they have the arsenal to continue fighting for customers.
Sonos is easily the biggest and most recognisable name in the multi-room audio market, but that doesn’t mean that it’s enjoyed great success. Just last year the company’s founder, John MacFarlane, stepped down as CEO due to increased competition from other players. Those other players included the likes of Amazon and Google with the Amazon Echo and Google Home smart speakers.
Despite the increased competition, Sonos has come back fighting. The firm’s Sonos One and Sonos Beam smart speakers have received rave reviews and should be the first to boast both Alexa and Google Assistant support – although customers are still waiting on the latter. The Sonos One has also helped the company’s revenue grow, with 18% growth reported in the first six months of Q1 2018.
While 18% isn’t exactly explosive growth, investors seem confident in Sonos’ future. After opening at $16 on the NASDAQ, the company’s shares skyrocketed 31% to close at $19.68. That values the company at $1.95 billion, not exactly a small amount for a company making just nine products.
Arlo Gains Independence
Another smart home company earning a killing on the stock market is Arlo, the former smart home division of networking manufacturer, Netgear. While Netgear retains the majority shareholding in Arlo, the firm is building up Arlo’s cash reserves to ensure that it can fight against more established smart home manufacturers.
Arlo’s biggest competition comes from the likes of Nest and Logitech, both of which offer competing security cameras. While Nest continues to be focused on internal politics, however, Arlo has managed to carve out a decent chunk of the smart security camera market. Q4 2017 proved a particularly important time for Arlo, with it growing revenue 66.9% to $128.5 million, although Q3 2017 did see higher growth year-over-year at 127.1%.
While Netgear shareholders reacted badly to the planned spin-off earlier in the year, investors were keen to get their hands on Arlo stock when it was made available. The company’s stock price is currently up 24% on its opening price of $16.
What Does This Mean For The Smart Home Market?
Given both Sonos and Arlo have seen success in their IPOs, it shows that investors are clearly keen at getting a stake into the fast-growing smart home market. That’s no surprise either, with UK households alone expected to spend £10.8bn on smart devices in 2019, according to PwC’s Connected Home 2.0 survey.
A successful IPO also means that those companies will now have more money to play with when it comes to investing in new products. Both Sonos and Arlo continue to face increased competition from companies with deeper pockets than they do, so the more money raised, the better their products can compete on the open market.