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Apple's HomePod Isn't Selling Well

By Evan Niu, CFA – Apr 12, 2018 at 4:33PM

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When will Apple release a more affordable version?

Considering lukewarm reviews and the general consensus that Siri lags competing virtual assistants, it should come as no surprise that Apple's (AAPL -1.26%) HomePod isn't selling all that well.

Many reviewers have criticized the company's first smart speaker as being not all that smart, incapable of some basic tasks such as setting multiple timers. The audio quality is far superior to other smart speakers, but also likely lost on the average consumer's ears. At $350, the HomePod is also priced at a meaningful premium relative to the competition. Even though Apple Music is available on Android, the competing platform is not supported by HomePod, effectively precluding broad swaths of the addressable market.

We're now seeing evidence that HomePod sales are somewhat slow out of the gate.

HomePod on a shelf

Image source: Apple.

Supply chain rumblings

Bloomberg reported yesterday that Apple has lowered its internal sales forecasts in response to lackluster demand, while reducing purchase orders from contract manufacturer Inventec. There was an initial spike in sales when the HomePod first went on sale, but they fell after the early demand was met. The HomePod grabbed 10% of all smart-speaker sales in the first 10 weeks following its launch, according to Slice Intelligence data cited in the report. Retail employees have also said that HomePod inventory is accumulating due to slow sales.

The heavy reliance on an iPhone is also a limiting factor, while competing smart speakers like Amazon.com's Echo or Alphabet's Google Home are more stand-alone products that can accomplish more tasks. Multiroom audio or pairing multiple speakers for stereo sound are not yet supported, although these features will be added later via software updates. In other words, the HomePod costs more and does less.

Separately, The China Times also reports that Apple has cut orders for the device. The company's monthly shipment forecast for the second quarter has reportedly been reduced by 60%, from 500,000 units to 200,000 units. Those adjustments adversely impact Apple's shipment forecast for the balance of the year.

This all comes after Barclays analyst Blayne Curtis put out a research note last month similarly arguing that HomePod sales have been "underwhelming."

A HomePod "Mini" can't come soon enough

I've been arguing for months that Apple needs to release a more affordable version so that consumers can place multiple units throughout the home without breaking the bank. The good news is that a HomePod "Mini" priced at $150 to $200 appears to be in the pipeline, but it's not clear if or when this rumored device will ever see the light of day.

While Apple generally doesn't place much value on being first to market, the longer it waits, the greater the potential switching costs will be for consumers who have already equipped their homes with multiple Echos or Google Homes. Hopefully for Apple, it moves forward with a HomePod Mini and releases it sooner rather than later.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

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