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Apple, Inc. Might Have a "HomePod Mini" in the Works

By Evan Niu, CFA - Feb 9, 2018 at 2:07PM

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Moving on down.

Today is Apple's (AAPL 2.45%) HomePod day! The Mac maker has officially launched its first smart speaker today, and while initial reviews aren't all that great, this could just be the beginning. The company is facing an uphill battle against market leaders Amazon.com (AMZN 3.58%) and Alphabet (GOOG 5.20%) (GOOGL 5.11%) subsidiary Google, whose respective families of smart-home devices dominate the space today. That's thanks in part to an expansive portfolio of devices that caters to a wide range of use cases and price points.

One product perched at the high end of the spectrum may not be enough to make a dent in the market. Apple really needs to launch a more affordable smart speaker that's not tailored to audiophiles, so consumers can buy multiple units to place all around their homes without breaking the bank.

HomePod on a shelf

Image source: Apple.

The Mac maker might do just that

Rosenblatt analyst Jun Zhang has just put out a research note (via Tech Trader Daily) suggesting that Apple could have a more affordable HomePod in the pipeline. Zhang believes that HomePod preorders are strong, selling out yesterday ahead of today's launch. The analyst is modeling for HomePod production of 6 million units this year, which would translate into about $2.1 billion in revenue that would inevitably be booked in Apple's "Other products" segment.

Perhaps more importantly, Zhang believes that the company is planning on launching a more affordable HomePod as early as this fall at a retail price point of $150 to $200. Amazon and Google aggressively cut prices during the holiday shopping seasons. Google clarifies that its price reductions are for a limited time, but Amazon does not. It's not clear if the reduced Echo prices are permanent, but it's conceivable since Amazon does like to give cost savings back to consumers as product cost curves naturally come down over time.

Here are the current listed prices for each company's smart-home product portfolios, and where a theoretical "HomePod Mini" would fall in Apple's lineup.

Chart comparing the smart home product portfolios of Amazon, Google, and Apple

Data source: Company websites. Prices do not reflect potential volume discounts. *Rumored.

Releasing a HomePod Mini at $150 to $200 could go a long way toward making Apple's lineup more competitive. Not everyone wants (or can even discern) high-fidelity audio, undermining the value proposition of the $350 HomePod. If the company were to start moving downmarket, $150 to $200 is probably as low as it would go. Apple doesn't like to compete solely on price, and tends to still position itself at a premium even when releasing more affordable products. It's difficult to imagine the company releasing a smart speaker at $100 or less.

While such a device would strengthen Apple's position in the smart speaker market, it still has plenty of work to do on other fronts, like improving Siri's capabilities and third-party smart-home integrations through HomeKit. Amazon has garnered significant momentum, and Google is about to accelerate its smart-home strategy by reintegrating Nest.

Apple has some catching up to do.

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Apple Inc. Stock Quote
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Alphabet Inc. Stock Quote
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