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Sonos Battles Google, Supply Chain Issues

Jim Cramer recently spoke with Sonos CEO Patrick Spence

A closely watched lawsuit over home audio patents could eventually provide a boost to smart speaker maker Sonos   (SONO) - Get Sonos, Inc. Report.

Patrick Spence, CEO of Sonos, told Jim Cramer on a recent episode of the Mad Money TV show about the company’s ongoing patent fight with Alphabet's Google  (GOOGL) - Get Alphabet Inc. Class A Report. He said the preliminary ruling came out in favor of Sonos and he expects a final ruling will also declare that Sonos' five patents were infringed by the tech giant. Find out more about Real Money columnist’s investing ideas here.

A U.S. International Trade Commission judge ruled in August that Google infringed the Sonos patents.

It was a preliminary ruling in a lawsuit that Sonos brought in January 2020, claiming that the Mountain View, Calif., search, advertising and tech giant infringed its smart-speaker patents. A final decision could come in mid December.

The suit alleged that Google improperly incorporated those patents in its products. The complaint has sought to stop sales of several Google products, including Nest home speakers, Pixel smartphones and Chromecast streaming-access devices.

The ruling could lead to a ban on Google importing those products from China. It could also lead Sonos to gain in licensing revenue for the products.

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Google has countersued Sonos over other patents so the legal fallout could take years to resolve.

Sonos shares are up more than 100% over the past year.

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Spence said that despite challenging supply chain issues caused by the pandemic, the future still looks bright for Sonos. He called it the most challenging time tech companies have ever faced.

Spence said the good news is the company is still only in 10% of their total addressable market. He told Cramer this is a golden age for audio, with more music, streaming and podcasts than ever before, and that doesn't even count first-run Hollywood movies, which demand the best audio experience.

As for those supply chain issues, Spence sees them as short-term delays and nothing that will impact their trajectory long term. He said Sonos customers have thus far shown a lot of loyalty and patience.

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