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The Hidden Gem Behind Masimo’s Sound United Acquisition


Masimo, a market-leading medical know-how firm specializing in monitoring units, misplaced roughly one-third of its market cap on the announcement of its acquisition of Sound United. This acquisition, at a value of $1.025 billion, was instantly accretive to earnings, in keeping with the corporate’s long-term 8–10% development charge. Nevertheless, it was a daring transfer for Masimo, because it essentially shifts the corporate’s income and working fashions. Almost half of the corporate’s income now comes from non-healthcare client electronics merchandise. This spooked traders who had been extra fascinated about Masimo as a pure healthcare play. The corporate justified the transaction by indicating that it brings a robust world distribution channel to Masimo, as they search to consumerize its know-how, starting with its new biosensing watch. We consider there’s extra to this story, and that this acquisition may, over time, assist Masimo speed up its share of the house telehealth market.

At first look, this can be a lot to pay simply to market a watch.

Earlier this 12 months, Masimo launched a biosensing watch, W1, on a B2B foundation to sufferers to be used after their discharge from the hospital. The watch is exclusive from current client sensing units as a result of it makes use of the identical know-how that medical suppliers have come to rely on for many years in essential hospital settings for the continual monitoring of a number of well being parameters, together with blood oxygen ranges, pulse charge, and respiratory charge. The corporate claims its watch maintains its accuracy even whereas the wearer is in movement; that is one thing that competing client biosensing units wrestle to do. Masimo expects to finally compete with Garmin and Match, and market the watch far more broadly to shoppers—particularly, to health fans who prefer to quantify their self-improvements—and leverage the Sound United world distribution channel and model loyalty to garner curiosity.

Biosensors are essential diagnostic instruments for measuring metrics like blood oxygen, respiratory charge, coronary heart charge, and temperature, and they’re more and more drawing demand from shoppers. This can be a byproduct of the consumerization of healthcare, one of many themes captured by the HTEC portfolio. Firms like Apple and Google have been rising their concentrate on healthcare during the last decade. Likewise, healthcare firms are rising their presence within the client world, and a few are drawing combined reactions from traders.

We consider the market could also be lacking the larger alternative Sound United brings.

The market indicated its disapproval of the Masimo/Sound United deal by means of the inventory response, with Masimo shedding over 30% of its worth on the announcement. In spite of everything, the corporate isn’t trying to compete with the large Good Watch market, which targets the inhabitants who needs to entry apps on their wrist. It’s trying to compete with a doubtlessly smaller $1–$2 billion health tracker market. That stated, the market is failing to note what Sound United brings to the desk. Past the watch, we consider there may be an excellent larger “name choice” on this acquisition—the usage of the tech within the affected person’s dwelling. Sound United has a product underneath the Denon model known as HEOS, a multi-room dwelling leisure working system that connects to completely different units. We see a chance the place Masimo will join the house medical units to this and primarily activate a complete hospital operation, from distant affected person monitoring to connecting suppliers to sufferers for reside interplay, no matter which room they’re in. For instance, somebody’s coronary heart charge all of the sudden adjustments, and a reside nurse simply begins chatting with that affected person.

In our view, Masimo may be the know-how chief that takes client and residential healthcare to the following stage. The house telehealth system alternative is estimated to be over $120 billion. Once you think about Masimo’s means to leverage Sound United to carry extra healthcare to the place the buyer is, the acquisition will get much more attention-grabbing.



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