Sonos CEO promises reforms after May app release 'failure'; leaders to forgo bonuses

Sonos

01/10/2024 13:30

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      CEO and seven other company leaders to forgo bonuses
    

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      Sonos to overhaul app, extend warranties, form customer
advisory
board
    

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      Sonos shares are down more than 30% since day before app's
release
    

  
    By Greg Bensinger
       Oct 1 (Reuters) - Speaker-maker Sonos  SONO.O  unveiled
on Tuesday a broad series of reforms that it hopes will restore
its reputation after a disastrous app update in May that
torpedoed customer trust and caused the company to cut staff.
    In an exclusive interview with Reuters, CEO Patrick Spence
acknowledged mistakes around the release of the app, users'
central hub for playing music and controlling the speakers, and
said he and seven other company leaders would forgo their bonus
in the most recent fiscal year and, unless certain benchmarks
are met, the coming one.
    “This is obviously a failure of Sonos, but it starts with me
in terms of where it started,” said Spence, 50. “So these
commitments are what we've put together to make sure that we
learn from this and make sure that the Sonos experience is
better than ever as we go forward.”
    After its release, Sonos quickly learned that the new app
was not allowing users to perform essential functions, such as
accessing or searching their music libraries, setting sleep
timers and even downloading the app. The company has since been
updating the app with new or revamped features roughly every two
weeks and said on Tuesday it is more than 80% towards its goal
of a complete overhaul.
    Since May, Sonos and Spence have been on something of an
apology tour to their roughly 15 million users. Sonos has
released multiple statements of contrition, studied bringing
back the previous app, pushed out new app updates and in August
Spence fielded questions on Reddit from angry customers.
    “When we make a mistake, we hear it, and that's okay,” he
said in the interview. 
    Spence said the app’s problems were the result of
insufficient testing and a desire to release too many features
at once, which he called a “big bang roll out.” 
    “We underestimated the complexity of the system and so our
testing didn't capture all of the things that it should,” said
Spence. “We released it too soon.”
    
    COSTLY MISHAP
    The Santa Barbara, California, company said it will extend
existing speaker warranties by an additional year, improve app
testing, release upgrades every two to four weeks in perpetuity
and appoint a current employee as “quality ombudsperson” to give
executives regular updates on new tech development and publish
an audit twice annually.
    Sonos is also forming a customer advisory board, similar to
the one for its dealer network, that can advise executives on
what improvements are necessary before they are broadly
released. Spence said that committee had not yet been formed.
    The app mishap has been costly for Sonos. The company
lowered its fourth quarter sales projections, delayed the
release of two new products, estimated a $20 million to $30
million expense related to fixing the app and, in August, cut
about 6% of staff, or 100 jobs. Its shares have dropped over 30%
since the day before the new app was pushed out. 
    Still, Sonos posted a 6% jump in third quarter sales to
$397.1 million and swung to a profit of $3.7 million compared
with a loss of $23.6 million a year earlier.
    Spence said in the interview that no additional job cuts
were planned. 
    The CEO said the board and other executives were working on
new metrics to measure leaders’ success to warrant bonuses and
would release those details in a securities filing. Spence,
whose total compensation was $5.19 million in fiscal 2023, took
a roughly $72,000 cash bonus. 
    “We're not going to relent on this until we're satisfied,”
he said.

 (Reporting by Greg Bensinger; Editing by Muralikumar
Anantharaman)
 ((greg.bensinger@thomsonreuters.com; Reuters Messaging:
@gregbensinger))