Aug 2, 2018

Sonos CEO talks IPO, services and a different mission than Apple

Patrick Spence and Sonos employees celebrate IPO. Photo courtesy of Nasdaq.

Sonos, a maker of smart speaker systems, went public today after raising $208 million in its IPO.

Axios spoke with CEO Patrick Spence about the IPO, competition from Apple and if it will begin offering digital services. The quick read:

  • He's open to someday offering digital services, in addition to devices.
  • He blames a low IPO price on "tech headwinds."
  • Many investors viewed Sonos as only a hardware business, not realizing the amount of software involved.
  • He acknowledged that Sonos can't maintain backward capability forever on older products, but says it will do so for newer ones.

You priced shares below the expected range, which is arguably on the bankers as much as the company. But give me your thoughts.

Obviously there were some headwinds and sell-off surrounding tech last week, and I think people were getting nervous about that. So I think our pricing reflected that.

Anything you'd do differently on the IPO road-show?

No. I think we had a tight message. It was probably more educating than I had expected. I had assumed people were a little more knowledgeable about what we built and that software is such a big part of what we do... When you build a physical product, people see it and just associate your name and brand with that particular item, and don't realize it's really a connected computer...

But, ultimately, we got people up to speed on our business model. For example, that we're more of a system than a product, which is something I don't see any other companies doing.

Not even Apple?

It's different because of strategic intent. I don't see them building a set of products that fulfills what everyone needs. Homepod is good, but you also need iPod and Apple Music. To me that's supporting a different strategic agenda, which is how to sell more iPhones.

Will Sonos ever develop its own services?

I'll remain open to it. But I've seen a lot of companies get caught up in the IPO process and promise to become things that they're not, so I think we have built a very loyal base of seven million homes and I think we have an opportunity to both grow the number of homes and, as we do that, see in the future if there are opportunities to add services. But, again, I don't want to get ahead of ourselves and attract investors on that basis.

On customer loyalty, your prospectus said you might stop maintaining "backward compatibility" for older products. Isn't that one big reason why Sonos customers have been so loyal?

There is no change in our philosophy in building long-lasting products. The history is clear. In the S-1 you need to outline any potential risk...

But you said more than just maybe. You said you "expect in the near to intermediate term, this... will no longer be practical or cost-effective."

Well, what we haven't gone through yet that we'll need to manage is some of the products that, as they reach the end of their useful life, how do we get customers to the next one. These are mini-computers and, as they reach their 10th or 13th year, it's just impossible to continue to support the software. So that's something we'll have to bite off as we mature, but there's no change to the philosophy of trying to continue to support devices for 5-10 years and support them over time.

How do you keep employees at Sonos after the post-IPO lockup on their shares expires?

I think it's my job to build a culture where people are connected to our mission and want to show up every day and fill more homes with music. If I haven't done that, people will leave, golden handcuffs or not. It's a good test of if we have the right people in the boat who believe in what we're doing and I've worked tirelessly as CEO to build the kind of place where people can really be connected and do the best work of their lives. And I'm confident that, as a public company, the best is yet to come.

Go deeper

Trump touts press briefing "ratings" as U.S. coronavirus case surge

Photo: Drew Angerer/Getty Images.

President Trump sent about a half-dozen tweets on Sunday touting the high television ratings that his coronavirus press briefings have received, selectively citing a New York Times article that compared them to "The Bachelor" and "Monday Night Football."

Why it matters: The president has been holding daily press briefings in the weeks since the coronavirus pandemic was declared, but news outlets have struggled with how to cover them live — as Trump has repeatedly been found to spread misinformation and contradict public health officials.

World coronavirus updates: Total cases surge to over 700,000

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens and confirmed plus presumptive cases from the CDC

There are now than more than 700,000 confirmed cases of the coronavirus around the world, according to data from Johns Hopkins. The virus has now killed more than 32,000 people — with Italy alone reporting over 10,000 deaths.

The big picture: Governments around the world have stepped up public health and economic measures to stop the spread of the virus and soften the financial impact. In the U.S., now the site of the largest outbreak in the world, President Trump said Saturday he would issue a "strong" travel advisory for New York, New Jersey and parts of Connecticut.

Go deeperArrowUpdated 38 mins ago - Health

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 2 p.m. ET: 704,095 — Total deaths: 33,509 — Total recoveries: 148,824.
  2. U.S.: Leads the world in cases. Total confirmed cases as of 2 p.m. ET: 132,637 — Total deaths: 2,351 — Total recoveries: 2,612.
  3. Federal government latest: The first federal prisoner to die from coronavirus was reported from a correctional facility in Louisiana on Sunday.
  4. Public health updates: Fauci says 100,000 to 200,000 Americans could die from virus.
  5. State updates: Louisiana governor says state is on track to exceed ventilator capacity by end of this week — Cuomo says Trump's mandatory quarantine comments "really panicked" people
  6. World updates: Italy on Sunday reported 756 new deaths, bringing its total 10,779. Spain reported almost 840 dead, another new daily record that bring its total to over 6,500.
  7. What should I do? Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk
  8. Other resources: CDC on how to avoid the virus, what to do if you get it.

Subscribe to Mike Allen's Axios AM to follow our coronavirus coverage each morning from your inbox.