Sonos CEO leaving after botched app revamp led to customer revolt

Sonos Inc. Chief Executive Officer Patrick Spence is leaving after eight years in the job, a move that follows a botched app revamp that upset customers and stymied growth.

The audio technology company named Tom Conrad, a board member and former executive at Snap Inc. and the Pandora music streaming service, as interim CEO effective Monday and said the company has hired a firm to find a new leader. Sonos said the move isn’t related to its first-quarter financial results, which will be announced in February.

Shares of Sonos fell 0.83% to $14.40 in New York on Monday, in line with a broader market pullback. The stock initially jumped as much as 7.1% in premarket trading on the news of Spence’s departure.

The decision to tap a new CEO comes after several months of turmoil at Sonos. In May, the company rolled out a new mobile app – the software consumers use to control their speakers and other equipment – that was riddled with bugs. Among the problems, the user interface confused customers, lost key accessibility features, and removed capabilities like the sleep timer and alarms.

“When it doesn’t work, our customers are taken out of the moment and are right to feel that we’ve let them down,” Conrad said about the Sonos user experience in an email to employees. “I think we’ll all agree that this year we’ve let far too many people down.”

Though Sonos has managed to release “remarkable” products, such as the Arc Ultra soundbar and Ace headphones, it was overshadowed by the poor experience, he wrote. It’s just not enough “when our customers’ alarms don’t go off, their kids can’t hear their playlist during breakfast, their surrounds don’t fire, or they can’t pause the music in time to answer the buzzing doorbell,” he wrote.

Customers complained they, in some cases, spent tens of thousands of dollars outfitting their homes with pricey Sonos speaker systems, only for them to no longer work as expected because of the app. The revamp was meant to modernize the design and better support a range of hardware offerings, but it didn’t go smoothly. Though the company investigated the idea of switching back to the old app, it determined such a move wasn’t possible because of the engineering challenges.

For months, Sonos and Spence worked to fix the problems and restore features, but the damage was done to the company’s brand. The crisis marred the launch of new products like the Ace headphones. Revenue fell 16% in the fiscal fourth quarter, which ended Sept. 28, and Wall Street is projecting a 15% decline in the holiday period.

Spence was criticized for taking too long to apologize to customers, and the chaos irked employees. Amid the problems, the company postponed multiple products and other initiatives, such as a TV set-top box.

The woes also weighed on Sonos’ stock price, which has fallen about 13% since the app launched. In August, the company fired about 100 employees as it struggled to fix the software.

“Last year presented real challenges that required real resilience. Of course, we have a lot to tackle on the road ahead – and also enormous opportunity,” Julius Genachowski, chairperson of the board, wrote to employees.

Conrad, who says he has a tattoo of the Sonos headphones on his left forearm, joined the board in 2017. The 55-year-old was one the creators of the Pandora music service and a vice president at Snap. Most recently, he was the product chief of short-lived video streaming app Quibi and the CEO of fasting app Zero Longevity Science.

Spence, who is also leaving the board of directors, joined Sonos in 2012 after a career at BlackBerry to become chief commercial officer. He’ll remain an adviser to the Sonos board through June and get paid $7,500 per month until then. He’ll be paid a cash severance of about $1.9 million, and his unvested shares in Sonos will vest.

Conrad will be paid $175,000 per month and $2.65 million in additional stock shares to run Santa Barbara, California-based Sonos, according to a regulatory filing.

Sonos has long been a favorite of audiophiles, but it will have to win back customers’ trust after the recent turmoil. Thousands of users have complained about the new app of being unresponsive, improperly adjusting speaker volume, and removing their local music library search and playlist editing. In December, the company acknowledged that the problems have persisted, including ones related to volume control and connecting to devices.

Despite the concerns, Spence successfully broadened Sonos’ lineup in recent years. The push has included adding headphones, redesigning the company’s Era speakers and introducing new soundbars. The board said in a statement it appreciates Spence’s dedication to the company.

In his memo to employees, Conrad pledged to not only restore order at Sonos but take the company into new areas.

“Getting back to basics is necessary, but clearly not enough to unlock the future we all envision for Sonos,” he wrote, saying that he wants to expand the company “well beyond” home speaker equipment.