If you’ve ever wanted a smart speaker to play music to your events or your personal use, you may have heard of the company Sonos. With Sonos beginning to penetrate the smart technology market with an upcoming IPO, the smart speaker company has warned critics and supporters alike that the ongoing trade conflict between China and the United States may be affecting Sonos and aspiring companies to be successful in their fields.
If you’ve been familiar with the progress of Sonos through the years, you may be familiar with the smart speaker company’s journey against competition such as Amazon, Google, and Apple. Unfortunately, Sonos has found itself in front of another potential source of conflict, courtesy of United States President Donald Trump.
When Sonos filed its official paperwork to raise $100-million in an initial problem offering, the smart speaker company said one of the biggest risk factors for the company is the Trump administration. In particular, it pointed that the United States’ ongoing trade conflict with China may make it harder for industries to conduct businesses.Sonos also warned in its IPO that the company could be forced to raise prices when other restrictions and significant tariffs are placed on imported Chinese products. These include when there are risks of making trade measures in retaliation to China’s policies. This can lead to various loss of customers and harm its reputation and performance in terms of operations.
Kathleen Smith, a Renaissance Capital principal, said she’s yet to encounter other companies issuing such a warning in their IPO. Smith is in charge of exchange-traded funds with a focus for IPOs. She said this might be the start of seeing such warnings in disclosures, as this is proof that the trade tariff saber-rattling has largely affected supply chains and commerce of companies.
It can be remembered that the Trump administration has imposed various tariffs on Chinese good that are worth $34-billion. China, in retaliation, responded by accusing the administration of beginning perhaps the largest trade war in economic history – this, alongside its own set of tariffs.
Some other companies sounded a bit more calm about the rather worsening trade conflict. Tim Cook, Apple CEO, said that he doesn’t expect the flagship iPhone to suffer from tariffs. Meanwhile, Sonos said this year’s tariffs on aluminum and steel have yet to affect its own material costs.
Smith said the Sonos IPO may not spark fear amongst potential investors of the company. In fact, Sonos may be in room for growth.
It can be remembered that Sonos has built itself a reputation for creating various home audio products and smart speakers. Since its inception in 2002, the company has become popular with a lot of consumers. In the fiscal year 2017, it had sales of as much as $992.5-million, and might actually have $1-billion in sales by the end of the year.
Of course, like with any other tech companies with IPOs, Sonos has had a history of losing profit. Regardless, it did trim its losses to as much as $14.2-million for 2017, and even had a $13.1-million increase in profit for the first half of fiscal year 2018.
The IPO will hopefully help Sonos boost its various financial resources with its own slate of smart speakers – assuming Sonos reaches its target market. Interestingly, smart speakers have started attracted top companies such as Amazon and Apple, which means Sonos is up for a lot of competition for its survival.
Sonos warned that a lot of its competitors have greater marketing, technical, and financial resources than the company, which means they are very well capable of developing better smart speakers that can cause demand Sonos products to be lowered.
Howewer, fierce competition with larger companies didn’t stop other startups from successfully establishing their IPOs – these include Spotify and Dropbox, which began their respective IPOs this year.
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