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July 20, 2011 at 5:33 PM

Sonos unveils $299 streaming speaker

Sonos has released a new amplified speaker that reduces the entry price of its streaming audio system to $299.

Called the Play:3, it’s the size of a large alarm clock — 5 by 6 by 10.5 inches — with three speakers and three digital amplifiers. It streams music from cloud services such as Rhapsody and Spotify, from online radio stations or from music stored on devices on a local network.

Playback is controlled with a $349 Sonos remote, which looks sort of like a touchscreen smartphone, or with Apple or Google phones running a free Sonos app.

The device must be wired to a home router, or connect with a $49 wireless adapter.

The Santa Barbara, Calif.-based company started in 2002 and set the standard for streaming audio hardware with systems that used to cost $750 to $1,000 and were aimed at households wanting multiple amplifiers to stream music wirelessly through the home.

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But increasingly its customers are using smartphones and iPads to control their home audio setups and it’s facing new competition from electronics companies building streaming capabilities into their stereo equipment and Apple devices that extend iTunes wirelessly through the home.

Sonos responded with a $399 standalone speaker-amplifier unit released in 2009. Called the S5, it was pitched as a companion to a free smartphone app that could be used instead of the expensive controller.

It was a gamble that risked cannibalizing the company’s upper end products, but it paid off and lifted the company out of the doldrums of the recession.

“Candidly the S5 has been the most sucessful product we’ve ever done,” co-founder Tom Cullen said, adding that it helped the company add more customers in one year than it had throughout its previous history.

With the Play:3, Sonos is shooting for younger customers, including smartphone owners raised on digital music and looking for better quality sound than traditional docking systems produce. It’s also easier to fit in a room than the boombox-sized S5, so Sonos is hoping its current customers to buy Play 3 units to extend their systems.

Sonos, which hired a lot of Microsoft employees to build its software, is planning to expand from 380 employees to 400 by the end of the year. Cullen said it’s not looking to go public but may take outside funding.

“We’ll probably end up lining up some private equity partner to provide liquidity for early employees because they can do that these days without going public,” he said. “There’s a bunch of specialty investment funds who’d like to wn a piece of a company like ours.”

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