What happened

Shares of home-audio company Sonos (NASDAQ:SONO) were trading higher all day. But the stock had a pronounced spike around 3 p.m. EST that allowed it to hit the all-time high of $23.68 per share, according to Yahoo! Finance. With the spike, it traded as much as 13% higher. But Sonos stock gave some back, finishing 8% higher for the day. 

So what

Legrand is a company with products that include speakers, cameras, and remote light switches. Today, Sonos announced that Legrand will be licensing Sonos's patents for manufacturing its NUVO multi-room wireless audio products going forward. 

A businesswoman draws an upward arrow over a bar chart displayed on a transparent touchscreen.

Image source: Getty Images.

Terms of the agreement weren't announced. However, the official press release stated Legrand generated sales of $5.6 billion in 2016. Considering Sonos has trailing twelve-month sales of around $1 billion, this could potentially be a big deal.

Regarding this new licensing deal, Sonos's chief legal officer said, "We're pleased to see more companies such as Legrand recognizing the strength and value of our IP and providing appropriate compensation."

Now what

In its filings with the Securities and Exchange Commission (SEC), Sonos says it already generates some revenue via licensing, though it doesn't break out how much. However, this deal with Legrand looks promising. Selling high-end speakers is a hard business. Granted, Sonos is good at it. But some sort of recurring revenue would be beneficial for this company.

This deal is multi-year, so Sonos will have some semblance of high-margin recurring revenue for a while. If more companies follow Legrand's lead, it could be good news for the business. Sonos stock trades in value territory, in my opinion, at less than two times sales. But I've long dismissed it because I've questioned how non-recurring hardware sales could generate sustainable shareholder returns. However, this news puts Sonos stock back on my watch list since its business could be changing for the better.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.