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The Hidden Gem Behind Masimo’s Sound United Acquisition

Masimo, a market-leading medical know-how firm specializing in monitoring gadgets, 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% progress price. Nonetheless, 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 shopper electronics merchandise. This spooked traders who had been extra concerned with Masimo as a pure healthcare play. The corporate justified the transaction by indicating that it brings a robust international distribution channel to Masimo, as they search to consumerize its know-how, starting with its new biosensing watch. We imagine there’s extra to this story, and that this acquisition might, 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 yr, 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 shopper sensing gadgets as a result of it makes use of the identical know-how that medical suppliers have come to depend upon for many years in important hospital settings for the continual monitoring of a number of well being parameters, together with blood oxygen ranges, pulse price, and respiratory price. The corporate claims its watch maintains its accuracy even whereas the wearer is in movement; that is one thing that competing shopper biosensing gadgets battle to do. Masimo expects to finally compete with Garmin and Match, and market the watch rather more broadly to customers—particularly, to health lovers who prefer to quantify their self-improvements—and leverage the Sound United international distribution channel and model loyalty to garner curiosity.

Biosensors are important diagnostic instruments for measuring metrics like blood oxygen, respiratory price, coronary heart price, and temperature, and they’re more and more drawing demand from customers. It is 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 over the past decade. Likewise, healthcare corporations are rising their presence within the shopper world, and a few are drawing blended reactions from traders.

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

The market indicated its disapproval of the Masimo/Sound United deal via the inventory response, with Masimo dropping over 30% of its worth on the announcement. In any case, 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 imagine there’s a fair larger “name choice” on this acquisition—using the tech within the affected person’s residence. Sound United has a product underneath the Denon model known as HEOS, a multi-room residence leisure working system that connects to completely different gadgets. We see a chance the place Masimo will join the house medical gadgets to this and basically activate a whole 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 price instantly adjustments, and a reside nurse simply begins chatting with that affected person.

In our view, Masimo might be the know-how chief that takes shopper and residential healthcare to the subsequent degree. The house telehealth gadget alternative is estimated to be over $120 billion. While you consider Masimo’s potential to leverage Sound United to carry extra healthcare to the place the patron is, the acquisition will get much more attention-grabbing.



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