Sonos Eyes Supply Chain Issues From Coronavirus, Continues Malaysia Migration
Sonos is watching the coronavirus impact closely, having manufacturing facilities in China that are now coming back on line, said Chief Financial Officer Brittany Bagley at a Tuesday-night investor conference. The company had already started moving manufacturing to Malaysia to mitigate the Section 301 tariffs and expects to have most U.S.-bound production there by year's end, she said.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
The vendor doesn’t have a significant sales presence in China so it’s not feeling any impact in the Chinese domestic market, Bagley said. It's assessing the effect of supply-chain disruptions on products sold in other markets.
Sonos’ purchase of the Snips voice platform in December (see 1912100036) gives the wireless multiroom music company a “differentiated customer experience” it isn’t getting with Amazon Alexa and Google Assistant, said Bagley. The CFO called Snips a “privacy-by-design” voice engine that meshes with Sonos’ philosophy on data. “We don’t sell data; we sell hardware and we sell a music experience,” she said. Having its own voice engine allows Sonos to “provide voice as an option for our customers who are not comfortable with the ask-anything voice agent sitting in their home,” she said.
By controlling its own voice service, Sonos can control the customer experience and “deeply integrate” voice control within the Sonos system, Bagley said. The company isn't looking to compete with Amazon or Google with its own ask-anything assistant, she said.
On Sonos' recent dust-up over the phaseout of software updates for legacy products (see 2001220057), Bagley crowed when telling of a customer complaining that the audio company is “as bad as Apple now." She said: “We’ll take it.”
As a result of blowback over the legacy product phaseout, “There are probably some things we should go back and re-look at,” Bagley said, citing its recycling program. She referenced the “unfortunate reality” of speakers now being “technology products.” While sun-setting software updates for legacy products is inevitable, “we didn’t make it nearly clear enough that that meant your speaker wasn’t going to stop working in May.” Old speakers will continue to work “for as long as we can make that work,” she said.
Sonos is looking at the rental model as a way to expand its base, and as a way of managing legacy product issues, Bagley said. “Lots of times people just want to rent things to try them so it’s important to offer that as an option,” she said. “If you’re on a rental program, you’re not going to run into legacy products; you’re always going to have what you need in your home to continue to get the software upgrades.” It's testing the model now before rolling it out broadly. The company believes it will reach a different customer base via a rental program.
On Sonos’ patent infringement complaint against Google filed with the International Trade Commission (see 2002280014), Bagley said, “I don’t think there’s that many companies who can really say they invented the category and have some truly fundamental IP in the category.” She noted Sonos won IP infringement cases against Denon over two of the five patents it has asserted against Google, “so to the extent that you can ever feel good, we think we have a pretty good case going into this.”
In a reply to Sonos’ allegations that Google smart speakers and other products infringe Sonos multiroom audio patents, Google said last month in docket 337-TA-1191 at the ITC that the charges were based on “revisionist history" (see 2002280014). "As we have said," responded a Sonos spokesperson Wednesday, "Google blatantly infringes on our intellectual property. We remain confident in our case and look forward to the facts coming out.”