In a move I have been anticipating for weeks, the Sonos Board has finally made a move and dismissed Patrick Spence as CEO as of this morning, Monday, January 13, 2025. The company has named a member of the Board – Tom Conrad – as an interim CEO, while a search has been launched for its next CEO.
See more on the exit of Spence as Sonos CEO
Sonos, Inc. (Nasdaq: SONO) announced this morning that its Board of Directors and Patrick Spence had reached an agreement in which Spence would step down as Sonos CEO, effective today. The move follows what has been a troubled tenure for the former Blackberry executive…with the last few months finding the company embroiled in controversy surrounding a rushed and botched rollout of an app update which created massive connectivity and usability issues for Sonos users…damaging the Sonos brand reputation as a “sound experience” company.
While Spence’s exit as CEO is effective today, he will remain in an advisory role through June 2025 to help ease the transition to a new leader. For the time being, that new leader is Tom Conrad, an independent member of the board since 2017. The Board has launched a search for a more permanent CEO in conjunction with “a leading executive search firm.”
Looking For A New Leader
What kind of leader is the board looking for? The announcement says it’s looking for “…a leader who will build on the Sonos legacy of innovation and excellence in serving its customers while also driving profitable growth.” Oh, and the board would like you to know that this change in leadership “…is unrelated to the Company’s fiscal first-quarter results…” which are going to be reported in early February. I guess we can decide that when we see their new quarterly earnings report, which I suspect is going to be ugly.
On behalf of the Board, I want to thank Patrick for his contributions as CEO. During his tenure, Patrick built on our pioneering success in wireless home audio and led the Company’s expansion into premium audio for home theater, portables, and headphones. We appreciate Patrick’s dedication to Sonos.
Julius Genachowski, Sonos Chair of Board of Directors
Who is Tom Conrad?
Interim CEO Conrad is leaving his role as CEO of Zero Longevity Science (ZLS) – a health-related app that is funded by Big Sky Health – to take on this interim CEO role at Sonos. The announcement from Sonos says Conrad “is a seasoned leader in consumer technology with over three decades of experience.” I’d say that description is a bit of a stretch. Prior to ZLS, Conrad was a Chief Product Officer for Quibi for two years. You may recall Quibi was a short format streaming service that failed. Quibi, which featured Meg Whitman as CEO, raised $1.75 billion from investors and ultimately was sold to Roku for less than $100 million.
Before his stint at Quibi, Conrad held the title of VP of Product for social media site Snapchat, another role he held for about two years. His longest tenure was as Chief Technology Officer at Pandora, which is a position he held for ten years. Before that is a collection of other companies he worked at including Pets.com, Kenamea, Berkely Systems, and more – all held for between 1-3 years.
Tom’s mandate is to improve the Sonos core experience for our customers, while optimizing our business to drive innovation and financial performance. With his deep product expertise and long-term relationship with Sonos, Tom is uniquely suited to guide the company forward during the transition and the Board looks forward to partnering with him closely. We are excited about the opportunity ahead.
Genachowski
Conrad: Excited to ‘Restore the Reliability’
Conrad says he is excited about this opportunity and looks forward to “…restor[ing] the reliability and user experience that have defined Sonos…”
I am deeply honored to step into this role at such an important moment for Sonos. Nearly two decades ago, when I led the earliest initiative to integrate Pandora and Sonos, I got my first glimpse of the magic that Sonos could bring to millions of lives every day. I am excited to work with our team to restore the reliability and user experience that have defined Sonos, while bringing innovative new products to market. Together, we will focus on delivering extraordinary experiences for our customers and strong results for our shareholders.
Tom Conrad, New Sonos Interim CEO
Let’s Be Fair: Spence Made Past Positive Contributions to Sonos’ Success
Spence has been with Sonos for 12 years, joining the company in 2012 as Chief Commercial Officer (basically top sales manager). He was appointed President in 2016 and CEO in 2017. He was most definitely part of the management team that oversaw Sonos’ rise in popularity and success over those years. He also was the point man for defending the company’s patent portfolio, to some degree of success.
The now former CEO is not leaving empty-handed. During the January to June transition period, Spence will be paid $7,500 a month “on regular payroll dates” through his final June 30, 2025 date, although he will forfeit the right to any bonus payments. This advisory pay amount – while not nothing is well below his normal pay rate of $550,000/year.
Spence’s Severance Package
Spence will also receive a severance package that includes a cash payment of $1.875 million. In the letter agreement between the board and Spence, the company notes that he holds 396,293 restricted stock units (RSUs) that are all unvested, 405,307 performance share awards (PSUs) that are all unvested, and 1,226,745 options to purchase stocks that are all vested. Of these amounts the company has come to the following decisions:
- RSUs – Spence will be allowed to use this next six-month period to be treated as normal employment for the purposes of determining the vesting of RSUs
- PSUs – The end date of his advisory role will be the end date for his PSUs
- Options – If Spence is a good boy over the next six months, the company will give him the right to exercise his options for another year, until June 30, 2026.
The Ex-CEO Must Sign a Non-Disparagement Agreement
The company will also cover his COBRA costs associated with continuing his company-provided health benefits for another twelve months. I don’t know the value of these extra provisions being offered to Spence, but it certainly looks to be in the millions of dollars.
Interestingly, the company is insisting that Spence sign a non-disparagement agreement. In fact, all of the above severance is contingent upon his executing such agreement.
Conrad’s Generous, If Potentially Short, Deal
In the meantime, Interim CEO Conrad will be paid $175,000/month, which equals an annual compensation rate of $2.1 million. Although Conrad will continue to serve on the board, he will not receive his non-employee director pay rate. He also must leave the board’s Compensation Committee. Conrad will also receive a grant of $2.65 million worth of “Sonos service-vesting restricted stock units (RSUs). These RSUs will vest at a rate of 1/6th per month.
What happens next? Clearly, the board is looking to change course from the app-disaster debacle they’ve found themselves in. The last few months have very much damaged the company’s reputation with consumers and even though it has recently embarked on an aggressive (and costly) advertising and promotion schedule, it is not clear the program is working.
The Situation Will Become Clear with the February Earnings Release
We’ll get a much better picture of how serious things have become at Sonos when we see its first-quarter earnings in February. However, keep in mind, the board already knows how those earnings look. They were very likely in the midst of reviewing and signing off on the 1Q results when it came to this decision.
This drastic CEO-change action……speaks for itself.
See more on Sonos by visiting sonos.com.
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