SoundHound Promises Profit This Year, Is an Acquisition Ahead?
Voice AI developer SoundHound has said that it will reach profitability in 2023 despite a massive fall in stock price from $8.72 to about $1 and a market cap fall from about $2 billion to about $200 million its IPO in April. The company promised that a combination of increased revenue and cost reductions would make profitability possible, but that might just set it up to be acquired by another company.
SoundHound Profit Promise
The drop in stock price over the last nine months has led SoundHound to reconsider how it operates and where it places resources. In its last quarterly report, SoundHound announced it had begun reducing its workforce by 10% despite the company beating analyst expectations. Nonetheless, the company has said it will slow investment in new verticals and language projects in favor of restaurants and licensing deals with automotive and smart device makers. SoundHound claims these shifts will cut costs by 40% yet allow for more than 50% in revenue growth.
“We are announcing these actions today to align with the demands of a changing market by targeting profitability within 2023,” SoundHound CEO Keyvan Mohajer said in a statement. “We are reducing costs while prioritizing our highest sources of revenue growth. With over $300M in cumulative bookings backlog, SoundHound is entering the year on a positive revenue trajectory, with a strong base of global customers shipping products using our industry-leading voice AI technology.”
Until now, SoundHound has been very busy developing new features for on-device and cloud voice AI. The company introduced a real-time transcription and annotation service and began integrating its voice AI into the Harman Ignite Store for cars. The automotive industry also paved the way for SoundHound’s first Mandarin language outlet as a feature for Dongfeng Peugeot Citroën Automobiles (DPCA) vehicles in China, an outgrowth of the company’s contracts with Stellantis in Europe. Becoming profitable and a far lower market cap and stock price might be just the thing to make SoundHound a perfect purchase for a company interested in its technology and future capabilities.
“SoundHound is quickly becoming an attractive acquisition target. They have a book of business with prominent customers, a product that has broad application and supports 22 languages, a highly discounted market capitalization from its public offering, and they are now on a path to profitability. Many companies are interested in having their own voice assistant, and SoundHound is suddenly a bargain,” Voicebot founder Bret Kinsella commented.
He added, “A large telecom provider or device maker would be ideal acquirers. Also, don’t count out IBM. SoundHound’s customer base aligns relatively well with IBM, and its solutions are easier to adopt than the Watson offerings. Another type of acquirer may also emerge. All of the big tech companies have their own voice assistant, so acquiring SoundHound may seem redundant. However, at the current valuation, there may be interest solely based on SoundHound’s portfolio of more than 200 patents. Some companies may want the patents while others may want to ensure SoundHound’s patents don’t wind up in the hands of a competitor.”