Google to Appeal German Court Ruling Granting Sonos Injunction

Google is “disappointed that Sonos has made false claims about our partnership and technology,” said a Google spokesperson Thursday. Sonos Chief Legal Officer Eddie Lazarus told investors on a quarterly call Wednesday that a German court granted Sonos a preliminary injunction against a European Google affiliate for infringing a Sonos patent. The patent enables and controls the transfer of media content from a mobile phone or tablet to one or more playback devices, said Lazarus, a former FCC and media-industry official.

Google appealed and is “awaiting the reasoning for the Court's ruling,” said the Google spokesperson. “We will continue to work to ensure that our German customers continue to have the best experience using our products.”

The order prohibits the offer or sale in Germany of Google's Cast technology, “some aspects of which implicate the Sonos patent at issue, and encompasses such products as the Pixel 4a smartphone, Nest Audio speakers and the YouTube Music app," Lazarus said: “We see the ruling as a powerful demonstration of the strength of Sonos' patent portfolio and our conviction that Google is a widespread infringer of our IP.” Sonos is “grateful the court has acknowledged Google’s blatant infringement of Sonos’ IP,” Lazarus said Thursday, saying the decision is a “promising milestone in our ongoing effort to defend our innovations and stand up to the unfair practices of Big Tech."

Sonos remains confident about its action against Google at the International Trade Commission, said Lazarus Wednesday after a preliminary decision, expected on May 11, was delayed to Aug. 13. Sonos alleges (see 2002060042) patent infringement covering grouping and synchronizing playback among smart devices, volume control for a group and individual device, stereo pairing and setup.

For fiscal Q2 ended April 3, Sonos revenue rose 90% to nearly $333 million, compared with a 17% decline in the year-ago quarter. Sonos speaker revenue grew 130% after a 27% COVID-19-related decline in the category a year ago. Chief Financial Officer Brittany Bagley cited strong sales for the Arc sound bar and Sub subwoofer.

System products revenue increased 10% vs. 22% a year ago on demand in the installer channel, where dealers reported shortages of component products, including the Amp. Partner products and other revenue increased 16%, driven by accessories and Sonance speakers, offset by lower Ikea revenue, Bagley said.

Bagley attributed overall revenue growth to the company’s ability to fulfill more demand due to ongoing supply chain capacity investments and better shipping and logistics processes. The company remains out of stock on a number of products, she said. The global supply situation “has only gotten more challenging” heading toward second half, and Sonos is seeing “significant increases in constraints on a variety of components.” Sonos is working to mitigate shortages as much as possible to “deliver on the incredible demand,” she said.

Sonos expects to get 9% of the total spend in the $18 billion premium home audio market, said CEO Patrick Spence. He sees a runway of 10 million more homes joining the Sonos ecosystem. At the end of fiscal 2020, Oct. 3, Sonos was in 11 million homes, 9% of the 116 million “affluent” homes the company considers its existing addressable market.

Spence referenced what he sees as a “golden age of audio,” citing the volume of music, audiobooks and podcasts available to consumers today. As more people become creators, he said, they will “spend even more time with audio, and find interesting new audio formats like social audio.”

Brand expansion is a focus for Sonos to bring in new customers through partnerships “with other premium brands." It partnered with North Face to help launch the Roam, the portable Bluetooth speaker that began shipping last month. It's seeing strong demand for Roam with sales at 150% of Sonos’ preorder forecast, said Spence. The portable Bluetooth speaker “provides the opportunity for millions of new customers to get started with Sonos,” he said. The company also has “ambitious plans” to expand in new categories, he said, and “to layer services on top of everything we do.” A long-term goal is to reach over half a million subscribers with the Sonos Radio HD streaming service.

Sonos raised guidance for fiscal 2021 to $1.62 billion-$1.67 billion, for 23%-26% growth. Previous guidance was for $1.52 billion-$1.57 billion, which was raised from the initial 2021 outlook. The stock closed 7.4% higher Thursday at $33.83.