Quirky's Chapter 11 Bankruptcy Filing Raises Questions About the Smart Home Market

Quirky agreed that Flextronics will buy certain Wink assets for $15 million, it said. The bid is subject to “higher or otherwise better offers,” said Quirky. It will look to conduct an auction, if other bids are received, and will seek court approval to have the sale close within 60 days, it said. Flextronics’ Flex Sales & Marketing North Asia is listed in the bankruptcy filing as Quirky’s biggest creditor at $18.7 million for “trade debt.”

On its blog Tuesday, Wink referred to Flextronics’ “stalking horse bid, which sets the minimum amount at which Wink will be acquired.” Other parties can submit bids of their own, which would bump up the final acquisition price, it said. If other bids aren't accepted, "Wink will likely be acquired" by Flextronics, said Wink.

BI Intelligence analyst John Greenough emailed us there were several signs leading up to the Quirky bankruptcy filing, including the replacement of CEO Ben Kaufman last month, last spring’s glitch that shut down Wink hubs (see 1504200039) and the failed sale of Wink. The company “blew through almost $170 million of funding,” said Greenough. Kaufman’s severance, listed in the bankruptcy filing's creditor section, is $296,311.

Greenough called the Quirky bankruptcy filing “just another sign that the smart home market isn’t ready.” The mass market “isn’t ready for the smart home,” Greenough said, “and Wink is just a casualty of appealing to a niche group.” He cited an iControl state of the smart home survey that said just 13 percent of Americans said it’s “very likely” that they will buy a smart home hub within the next year. “That’s a pretty small percentage for a device that's basically essential to have multiple smart home products,” said Greenough.

Current smart home products “are too niche and don’t provide a lot of value to the homeowner,” said Greenough. He contrasted the smart home market with the smartphone market. “What Apple and Samsung were successful in doing was proving a need for their smartphones,” he said. “Smart home device/platform providers, like Wink, are going to have a lot of trouble to replicate that success to reach mass-market adoption.”

Kevin Meagher, who launched Lowe’s Iris smart home business and recently moved to smart home solution company ROC-Connect, attributed the Quirky news to “too many mistakes” in Quirky’s Wink rollout, but maintained that the smart home market overall is on an incline. “They were doing the right thing in a growth market but failed because of poor execution,” said Meagher of Quirky.

Meagher doesn’t see Quirky’s demise as a reflection on the smart home market overall. “Like all new markets, there will be winners and losers,” said Meagher. “All the evidence indicates that the smart home and IOT space continues to accelerate.”

On the $15 million Flextronics bid, Meagher said it doesn’t say “anything meaningful about valuations.” He noted that Smart Things and Lowe’s Iris built “good technology platforms, executed well, and are growing strongly.” Quirky and Wink “had the same opportunity but they clearly failed so an offer of $15 million seems to reflect the scrap value and I assume takes into account future investment needed to try to recover the business and the brand,” he said.

Quirky said the bankruptcy filing doesn’t affect the Wink smart home experience for users, “nor how Wink operates day-to-day.” Wink’s engineers and designers will “continue to enhance the Wink platform to provide new, meaningful ways for customers to interact with their smart home,” said Quirky. Amazon and Home Depot will continue to sell the Wink Hub and Wink Relay, and Wink’s customer support team will continue to provide “the same quality assistance,” Quirky said. The Wink blog said, “Wink will continue to be Wink.”

While the Quirky website Tuesday opened to a splash page steering visitors to news of the bankruptcy filing and contact information for Quirky’s bankruptcy attorney, Ronald Friedman of SilvermanAcampora, the Wink website was business as usual. Twitter didn’t appear during a quick scan to register any comments or concerns about the sale of the business from users. There were numerous tweets about Wink hub connection issues dating to Sunday. In response to those, a Wink spokesperson tweeted: “We are noticing increased connection issues for Wink users. Our engineers are working with our upstream providers to get this resolved ASAP.”

In response to our questions about Flextronics’ interest in the smart home market, a spokeswoman, citing the company’s recent name change to Flex, told us that Flex “has evolved as technology leader, far beyond its early days as a contract manufacturer building products for OEMs around the world.” In an industry full of “disruptive technologies and business models all built in a world of rapidly increasing business speed,” Flex is a “driving force behind a lot of this change” and at the “epicenter of IoT,” said the spokeswoman. She wouldn’t comment on “speculation, confidential agreements, legal or court proceedings, or any type of ongoing negotiation” regarding Wink.

General Electric, which invested $30 million in Quirky and launched smart light bulbs for the Wink platform -- along with a $279 air conditioner under the Aros brand -- didn’t respond to our request for comment. GE held an event in October (see 1410200050) touting its relationship with Quirky/Wink and Home Depot. On a panel at GE Lighting’s famed Nela Park campus, GE Lighting CEO Maryrose Sylvester called the current LED-driven period “a pivotal moment” and an “important time in the transformation of lighting.” GE’s partnership with Quirky for the Wink connected home platform, she said, gave GE an opportunity “to truly change the world.”

GE also didn’t respond to questions about the role its Schenectady, New York-based customer service center, which Quirky leveraged for Wink connected home products, would play in Wink going forward.