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Earnings

Sonos earnings: Sales down, but speaker use surging

Sonos earnings: Sales down, but speaker use surging
  • Fiscal Q2 revenue: $175M (-17% YoY, -69% QoQ, vs. $208M expected)
  • Q2 loss: $52.3M (Up 129% YoY from $22.8M Q2 2019)
  • Q3 guidance: Sonos withdrew its FY 2020 guidance, and has historically not offered quarterly guidance.

The big number: The smart speaker maker's sales tanked during the quarter as retailers closed stores across the globe, with revenue declining 23% in March alone. The company's business stabilized in April, only trailing April 2019 revenues by 5%.

People are talking: "It's a very volatile time," Sonos CEO Patrick Spence told Protocol on Wednesday. "I don't think anybody really knows what the next few months hold." Spence said his company has been looking for ways to weather the storm, including by reducing costs through a freeze on new hires and raises. However, Spence also said the company may spend more on marketing in the coming months to position itself as a solution for people staying at home. "The world just changed," he said. "That means our marketing does need to change."

Opportunities: Sonos introduced three new products Wednesday, including a redesigned sound bar that should reinvigorate demand. What's more, stay-at-home orders have yielded a massive surge in use of existing Sonos products. Listening hours in March were up 32% year-over-year, and increased an estimated 48% year-over-year in April. That's good news for the company's nascent services business; Sonos launched its first ad-supported streaming service in April.

Threats: It's been a challenging couple of years for the consumer electronics industry as a whole. In 2018, component shortages slowed manufacturing. Last year, the threat of tariffs kept the industry on edge. Now, COVID-19 provides the latest hit. "There's always something," Spence said. "The companies that can adjust and then persevere through this, I think it just makes you stronger as you think about the future."

The power struggle: One of the big industry transformations affecting Sonos is the shift from traditional retail to ecommerce, and COVID-19 seems to be accelerating this. The company's web sales were up 400% year-over-year in April as retail closed its doors. That momentum changes how Sonos is thinking about sales in general. In the past, many assumed that consumers would want to listen to a $500 speaker before opening up their pocketbooks. "That's questionable," Spence said. "We've seen that acceleration of people being confident in their ecommerce purchases."

People

Beeper built the universal messaging app the world needed

It's an app for all your social apps. And part of an entirely new way to think about chat.

Beeper is an app for all your messaging apps, including the hard-to-access ones.

Image: Beeper

Eric Migicovsky likes to tinker. And the former CEO of Pebble — he's now a partner at Y Combinator — knows a thing or two about messaging. "You remember on the Pebble," he asked me, "how we had this microphone, and on Android you could reply to all kinds of messages?" Migicovsky liked that feature, and he especially liked that it didn't care which app you used. Android-using Pebble wearers could speak their replies to texts, Messenger chats, almost any notification that popped up.

That kind of universal, non-siloed approach to messaging appealed to Migicovsky, and it didn't really exist anywhere else. "Remember Trillian from back in the day?" he asked, somewhat wistfully. "Or Adium?" They were the gold-standard of universal messaging apps; users could log in to their AIM, MSN, GChat and Yahoo accounts, and chat with everyone in one place.

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David Pierce

David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Power

Sonos CEO Patrick Spence: There’s money in ad sales for us

The smart speaker maker adds in-house ad sales as radio service continues to grow.

"Given the kind of customer base that we have and given the adoption we've seen in Sonos Radio, there's absolutely advertising revenue there," Patrick Spence says.

Photo: Andrej Sokolow/Picture Alliance via Getty Images

Sonos is doubling down on its efforts to monetize services on its platform, and is now looking to build out an in-house ad sales team for its free Sonos Radio service. Sonos CEO Patrick Spence confirmed the news in a conversation with Protocol on Wednesday, saying that in-house ad sales could help the company attract the right kind of brand advertisers to its platform. "Given the kind of customer base that we have and given the adoption we've seen in Sonos Radio, there's absolutely advertising revenue there," he said.

Spence made these remarks ahead of the release of the company's fiscal Q4 2020 earnings results. The company grew its revenue 16% year-over-year, to the tune of $339.8 million for the quarter. Earnings per share came in at $0.15, ahead of the $0.02 that analysts had expected. The company added 1.8 million new households to its customer base in its fiscal 2020, and close to 11 million households now own Sonos products, with an average of 2.9 Sonos products in each of those households.

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Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

Power

Investors didn’t like Ubisoft and Activision’s earnings

Both stocks plunged on the companies' forecasts.

The outlook is good for console manufacturers, but not so much on the software side.

Image: Protocol

Big Tech companies weren't the only ones reporting earnings this week; some of the biggest players in the gaming industry were, too. And there was a sharp divide: While the outlook's good for console manufacturers, things are less peachy on the software side.

Sony and Microsoft both reported earlier in the week, and both companies' gaming divisions had pretty good quarters. While PS4 sales dropped, unsurprisingly, software and subscription revenue soared. And an optimistic outlook for the PS5 — Sony's hoping to sell 7.6 million by the end of March — and the subscription and software sales that should entail, led Sony to raise its full-year operating income forecast by 13%.

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Shakeel Hashim

Shakeel Hashim ( @shakeelhashim) is a growth manager at Protocol, based in London. He was previously an analyst at Finimize covering business and economics, and a digital journalist at News UK. His writing has appeared in The Economist and its book, Uncommon Knowledge.

Power

Despite an early-week scare, cloud earnings finish strong

SAP's disappointing results had investors worried that a weak economy had finally caught up with the titans of enterprise tech, but AWS, Microsoft and Google are still going strong.

All three major vendors reported strong revenue growth this week.

Image: Protocol and Gonza

At a moment of great uncertainty for the world economy, with a new wave of the pandemic looming and one of the most consequential U.S. elections in decades around the corner, it's still a pretty good time to be in the cloud computing business.

AWS, Microsoft and Google all continued to benefit from the generational shift away from self-managed data centers to at least some degree of cloud computing during the third quarter of 2020. All three major vendors reported strong revenue growth this week but appear to be very closely watching an unsteady economy that could be forced into lockdown once again this winter.

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Tom Krazit

Tom Krazit ( @tomkrazit) is a senior reporter at Protocol, covering cloud computing and enterprise technology out of the Pacific Northwest. He has written and edited stories about the technology industry for almost two decades for publications such as IDG, CNET, paidContent, and GeekWire. He served as executive editor of Gigaom and Structure, and most recently produced a leading cloud computing newsletter called Mostly Cloudy.

People

After discontinuing free trials, Netflix plans StreamFest promotion

The streaming service is looking to first test a free weekend in India.

Anyone who wants to keep watching after the conclusion of the two-day event will have to sign up for a regular account.

Photo: Thibault Penin

Netflix is looking to promote its service with a 48-hour free streaming event, confirmed COO Greg Peters during the company's Q3 2020 earnings call Tuesday afternoon. Netflix is looking to first test the free streaming offer in India, and may bring it to other countries in the following months.

"We think that giving everyone in a country access to Netflix for free for a weekend could be a great way to expose a bunch of new people to the amazing stories that we have," Peters said. "Really creating an event, and hopefully get a bunch of those folks to sign up."

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Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

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