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Can a Smarter Siri Threaten AMZN, GOOGL in Smart Speaker Race?

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Apple’s (AAPL - Free Report) voice assistant Siri has become smarter as discovered by the venture capital firm Loup Venture. Per the firm’s latest Annual Smart Speaker IQ test, Siri’s performance has improved the most, by 22 percentage points in terms of questions answered correctly, since the last test.

Notably, this year, the test was conducted on four smart speakers, including Apple’s HomePod, Amazon (AMZN - Free Report) Echo, Alphabet’s (GOOGL - Free Report) Google Home and Harman Kardon Invoke. These are supported by Siri, Alexa, Google Voice Assistant and Microsoft’s (MSFT - Free Report) Cortana, respectively.

Out of the 800 questions, Siri answered 74.6% correctly and misunderstood only three. In comparison, Alexa answered 72.5% correctly (64% last year test) and misunderstood eight, while Cortana answered 63% correctly (56% last year test) and misunderstood just five questions.

Google Voice Assistant topped the test as it answered 88% correctly (81% in last year’s test) and understood all 800 questions.

Amazon & Google Dominate the Smart Speaker Space

Amazon & Google currently dominate the smart speaker market. Per data from Strategy Analytics, the two companies accounted for more than 50% of the smart speaker market share, as global shipment surged 197% year over year to 22.7 million units in third-quarter 2018.

Amazon shipped 7.2 million Echo devices, reflecting year-over-year growth of 45%. The e-commerce giant had a market share of 32%, which however, declined from 64.8% in the year-ago quarter, highlighting increasing competition.

Nevertheless, Amazon is expected to dominate the market, backed by robust features of Echo devices and affordability. Moreover, improving Alexa skills is a key catalyst. Further, this Zacks Rank #3 (Hold) stock has a strong focus toward expanding footprint in the global market, which is a major growth driver.
 

 

Google trailed Amazon with 22.7% market share that has also decreased from year-ago quarter’s 24.5%. However, the search giant’s device shipment soared 174% year over year to 5.2 million. This Zacks #3 Ranked stock’s strong expertise in artificial intelligence (AI) techniques is enhancing Google Assistant skills, which is a key catalyst behind the rapid proliferation of Google Home.
 

 

Furthermore, Alibaba (BABA - Free Report) and Xiaomi gained the most in terms of shipment although their market share was minuscule. Baidu (BIDU - Free Report) gained the most in terms of market share, 8.4%, at the end of the third quarter.

Can Apple HomePod Emerge as a Challenger?

Apple sold 1.1 million HomePods and gained a market share of 4.8%. This places it at the bottom part of Strategy Analytics’ list. Notably, the iPhone maker is a late entrant into the smart speaker market. Additionally, rapidly increasing number of new vendors makes it tough for Apple to become a formidable challenger to Amazon and Google in the smart speaker market, at least for 2019.
 

 

In fact, market research firm IDC believes, despite “widespread availability” of Siri, Cortana, and Bixby, these will not be able to challenge Google or Amazon’s dominance in terms of unit shipment.

Nonetheless, it will be unwise to ignore Apple’s endeavors in this market. A smarter Siri, along with a loyal customer base and expanding global footprint, fortifies Apple’s competitive position in the market. In addition, superior music quality in HomePod gives the company an edge over other speakers in the market.

Further, Apple’s increased focus on infusing AI and machine learning in its solutions and devices is noteworthy. The company has hired former Google head of search and AI, John Giannandrea, to lead its restructured AI division that includes the machine learning division, Siri team, and the Core ML API team. In addition to all these, acquisition of start-ups like Silk Labs enhances the company’s expertise in the domain.

Apple currently has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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