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HomePod Could Still Clean Echo's Clock

By Danny Vena – Jun 21, 2017 at 5:00PM

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What began as a novelty has emerged as an all-out tech battlefield. Amazon started it all with the Echo, but the competition is just starting to hit its stride, and Apple is now a player.

Investors have no doubt become accustomed to the stealthy way in which artificial intelligence (AI) is gaining ground in our everyday lives. Apple Inc. (AAPL 1.92%) started the trend with the introduction of the much-maligned Siri in late 2011. Since then, Siri has given way to a host of virtual personal assistants available on the majority of smartphones and a host of other smart devices., Inc. (AMZN -0.07%) was the first to introduce a virtual assistant that wasn't tethered to a smartphone, with Alexa and its smart-home speaker, the Echo. Amazon has since introduced a variety of Alexa-enhanced sibling smart speakers, including the smaller Dot, the portable Tap, and the camera-bearing, fashion-focused Look. Amazon will soon release the Show, which provides all the advantages of its predecessors while providing a touchscreen for viewing.

Amazon had the market to itself since the Echo was introduced in 2014, but the competition is heating up in a big way. Alphabet Inc. (GOOGL 4.61%) (GOOG 4.42%) countered with the Google Home smart speaker. Fashionably late to the party is the HomePod by Apple. This development isn't unusual, as the iPhone maker has had a habit of rolling out a device later than its competitors and providing a premium experience, in seeking to dominate the high end of the market. It appears that's exactly what Apple has in mind here.

A white HomePod sitting on a shelf.

Apple's smart speaker focuses on, well, the speaker. Image source: Apple.

I've got the music in me

Apple describes how it has chosen to focus on the musical capabilities of its HomePod:

"HomePod features a large, Apple-designed woofer for deep, clean bass, a custom array of seven beam-forming tweeters that provide pure high-frequency acoustics with incredible directional control, and powerful technologies built right in to preserve the richness and intent of the original recordings." 

The HomePod also features an A8 chip, which offers spatial awareness -- detecting the unit's surroundings and optimizing the sound based on its location, a feature typically found in high-end music systems and speakers. Music lovers can also wirelessly connect two or more HomePods together to create a sound system. In keeping with Apple's focus on privacy and security, all communications with the HomePod are encrypted and sent using an anonymous Siri identifier.

If you build it, they will come

According to a recent survey, 33% of U.S. adults -- about 70 million in all -- are interested in buying Apple's new smart speaker. That percentage is even higher among current Apple customers, with 45% expressing interest in owning the HomePod. While interest doesn't always equate to sales, it bears watching. On the downside, nearly 57% of respondents also indicated that price was the most important aspect regarding a purchase. At $350, the HomePod is nearly double the $180 cost of the Echo and significantly more than the $129 of the Google Home.

Alexa's claim to fame is her impressive list of skills, numbering over 10,000, and her multi-year head start in the market. Google's advantage is its cutting-edge AI, which responds to any requests, rather than being limited to specific commands. It also has the advantage of using its ubiquitous search as an information base and can sync multiple speakers.

A black HomePod.

Sometimes last can still be first. Image source: Apple.

Sometimes last is best

Apple has entered many a product category late, only to dominate on arrival. The most recent example is the Apple Watch. In the fourth quarter of 2016, Apple controlled 63% of the smartwatch segment, according to Strategy Analytics. The HomePod won't be available until December, so we'll have to wait to see how this plays out.

Don't be surprised if Apple's HomePod sprints out of the gate and takes a significant chunk of Alexa's business. It's done this before.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Alphabet (A shares), Amazon, and Apple. Danny Vena has the following options: long January 2018 $640 calls on Alphabet (C shares) and short January 2018 $650 calls on Alphabet (C shares). The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Apple. The Motley Fool has a disclosure policy.

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