Sonos is being rebuilt from the ground up with new Chief Executive Tom Conrad claiming the Company will be “Scrappier and a more focused enterprise” in the future.
He confident that there is still enough IP in the Company for the struggling business to make a comeback but it is going to “Be hard” he said.
Conrad has taken a blowtorch to woke management left in the Company, after the long overdue sacking of former CEO Patrick Spence Seen below) who has been credited along with former senior management of self-destroying the brand.
Former Sonos CEO Patrick Spence
Analysts like what Conrad is doing but it appears that he has a long way to go before any form of turnaround is achieved.
“Stepping back, we are impressed by management’s ability to rip costs out of the model,” Erik Woodring of Morgan Stanley wrote in a note to clients on Friday.
He kept his sell rating on the stock though, citing “a tough demand backdrop and elevated uncertainty” that hangs over Sonos.
Sonos is still reeling from a disastrous update to its app in May of last year, which left customers in Australia who shelled out for premium speakers unable to use their investment.
Only 38% of analysts rate Sonos as a buy, compared with 73% before the app rollout last year, according to FactSet data.
Speaking at a conference call on Friday Conrad said “Frankly, we are facing some very complex and long-standing software problems. As a longtime passionate customer and I, I know the magic of Sonos, but I also know the extreme disappointment of the company’s recent tech challenges. With respect to our expense base, I’m closely partnering with our CFO, Saori Casey, to drive operational efficiency and improve our financial performance”.
“To accomplish this, I’m returning Sonos to a scrappier and more focused enterprise, drawing on the lessons I’ve learned from the successes and challenges I’ve navigated at companies of all stripes for over 30 years from Apple to Pandora to Snapchat to Quibi”.
“Despite recent progress, our core experience still needs significant improvement. Second, we must continue our effort to bring our expenses in line with our revenue”.
There was no mention of whether Sonos will remain as a subsidiary in Australia or return to a distributor model.
One particularly telling f
act is that the company’s product sales for the second half of the calendar year fell 14% from a year earlier to about 2.7 million products as customers stopped buying the stock and retailers in several Countries cut back on ranging, in particular their new Ace headphones.
Conrad’s predecessor Patrick Spence was punting on the headphones which some claim should have been launched six years earlier to lift sales.
The Ace headphone launch that took place about a month after the app rollout turned out to be “the worst time possible,” Sonos Chief Financial Officer Saori Casey admitted on the earnings call.
She claimed that the initial sales of headphones to retailers was good, but the sellout was poor.
Analysts now expect Sonos’s revenue to fall 3% for the fiscal year ending in September after an 8.3% drop last year.
Under Spence the business was a Company with significant structural weaknesses claims observers.
Conrad said that his reorganization of the company’s product teams “revealed organizational layers and redundancies that were not serving us,” adding that the cuts included about half a dozen vice presidents.
