Amazon said on Monday that it’s acquiring Eero, a developer of internet routers that can be easily connected in the home. While the terms of the deal weren’t disclosed, this deal could significantly lift AMZN stock.
It’s Amazon‘s latest push into the smart home, following the acquisition of video doorbell maker Ring last year for $1 billion. Amazon’s primary home device is its own Echo smart speaker, powered by Alexa.
In the router market, Google has a competing product called Google Wi-Fi. Apple discontinued AirPort home routers last year, and Cisco sold Linksys to Belkin in 2013. Netgear stock was down as much as 5 percent after hours following the announcement.
Eero, based in San Francisco, was founded in 2014 by Nick Weaver, Amos Schallich and Nate Hardison with the goal of making Wi-Fi simple to use, easy to install and effective across many rooms in a house. In 2015, the start-up sold $2.5 million worth of products in its first two weeks after the company began accepting preorders.
Dave Limp, senior vice president of Amazon devices and services, said:
“We have a shared vision that the smart home experience can get even easier, and we’re committed to continue innovating on behalf of customers.”
Already in November, Mr. Limp said the company had more than doubled the number of workers dedicated to Alexa and Echo devices since fall 2017.
Nick Weaver, Eero’s chief executive and one of its founders, said in a statement:
“From the beginning, Eero’s mission has been to make the technology in homes just work. We started with Wi-Fi because it’s the foundation of the modern home.”
Weaver, who worked at Menlo Ventures before Eero was founded in 2014, said working with Amazon could help Eero bring more systems to customers around the world.
Amazon said Eero’s products and services have garnered favorable ratings with customers on the Amazon website.
Reliable Wi-Fi is important to Amazon’s in-home strategy. For example, your ‘Fire TV’ won’t work well with 4K HDR content if you don’t have a good connection. Its range of Ring products rely on constant and good internet to operate properly. And if Amazon ever introduces something like a home robot, that needs to have a connection no matter where it roams.
In the end, owning your home Wi-Fi might help Amazon make sure that all of its other products and services are operating as efficiently as possible.
Google is In, Apple is Out
Alphabet subsidiary Google has been making significant inroads in the smart speaker market, which ties directly into the smart-home space. Google jumped into mesh networking years ago, releasing Google Wi-Fi in 2016. That product followed OnHub, the first router that Google made.
Google represents the largest and most direct competitor to Amazon’s dominance of the smart home, so it’s little wonder why Amazon feels compelled to get into consumer networking equipment, even as Apple just recently discontinued its line of Airport routers. Apple instead now sells the Linksys Velop mesh system; primary contract manufacturing partner Foxconn owns Linksys.
The Eero acquisition is a no-brainer, one that should reinforce Amazon’s lead in smart-home technology.
While neither Amazon nor Eero has given an indication that there will be any changes to this service in light of Amazon’s new ownership, it’s worth noting that the online retailer began offering Whole Foods discounts for Prime members after it acquired the supermarket in 2017 for $13.7 billion. (A new report from The Wall Street Journal, however, indicates that may no longer be the case.)
The Eero deal is the latest in a string of acquisitions that puts Amazon in nearly every corner of the home, from the kitchen to the front door. Last February news broke that Amazon would acquire the video-doorbell maker Ring for $1 billion in a move that was largely perceived as a means of furthering its dominance in the smart-home and retail spaces. Before that, Amazon’s acquisition of Whole Foods gave it a pipeline into consumers’ kitchens.
Amazon’s acquisition of Eero also provides the online-shopping giant with a crucial piece of the smart-home market that could prove necessary for maintaining its status as a leader in smart-home technology. Both Google and Samsung, arguably Amazon’s biggest rivals in the space, have long offered their own mesh Wi-Fi routers that work with their own respective smartphone apps. Through these apps, users can view connected devices, block certain websites, and manage other features.
And not to foget, Amazon reported earnings per share of $6.04, versus analyst estimates of $5.65, and revenue of $72.4 billion versus estimates of $71.9 billion. But it issued Q1 guidance of revenue between $56 billion and $60 billion, short of consensus estimates of $60.83 billion, and operating income of $2.3 billion to $3.3 billion, roughly in line with a $3.09 billion consensus.