Masimo Corporation, a global leader in non-invasive monitoring technologies and audio products, announced on March 22, 2024, that it is considering a separation of its Consumer Business, which could take the form of a spin-off, Joint Venture, or merger. This move would involve the separation of Masimo’s consumer audio and consumer health products from its professional healthcare and telehealth products. CEO Joe Kiani is expected to remain Chairman of Masimo and would also be named Chairman of the newly created company. The company aims to complete the separation as soon as possible, subject to regulatory approvals, although it may occur in 2025 or later based on current financial guidance.
The decision to separate the Consumer Business comes after Masimo’s acquisition of Sound United in April 2022 did not yield expected synergies, leading to lower profitability. The challenging macro environment in 2023 further impacted the consumer business, resulting in a decrease in demand for consumer audio products. Activist investor Politan Capital Management, which acquired an 8.9% ownership stake in Masimo post the Sound United acquisition, obtained two seats on the Masimo Board and pushed for changes within the company. Masimo aims to improve the profitability of its healthcare business by separating its less-profitable consumer business, allowing it to focus on its growing and more profitable healthcare segment.
Politan Capital has expressed support for the strategic review of separating the Consumer Business but has raised concerns about governance and oversight within Masimo. The Board is evaluating the potential separation, with Mr. Kiani committed to pursuing a separation that benefits both companies. Masimo and Politan are currently in a tussle over the spin-off of the consumer business, with Politan concerned about maintaining control and influence over both separated companies. The exact timeline and details of the separation are yet to be disclosed.
In a separate legal battle, Masimo sued Apple in January 2020 for patent infringement related to pulse oximeter devices, sensors, and data collection systems. Apple was found to infringe some of Masimo’s patents, resulting in a ban on importing Apple Watch Series 9 and Ultra 2 models into the United States by the International Trade Commission. The legal dispute between the two companies is ongoing, with Masimo pushing for a resolution in its favor. Meanwhile, Masimo has provided guidance for FY24, expecting total revenue of $2.05 billion to $2.17 billion, with adjusted earnings per share of $3.44 to $3.60.
Masimo Corporation, headquartered in Irvine, California, develops, manufactures, and markets patient monitoring technologies, automation, and connectivity solutions globally. The company’s Healthcare segment offers non-invasive patient monitoring technologies, hospital automation, remote monitoring devices, and consumer health products. The Non-healthcare segment focuses on home sound integration technologies, professional sound studios, and high-performance in-vehicle audio systems acquired through the purchase of Sound United in 2022. Masimo reported total revenue of approximately $2.0 billion in FY23, with the non-healthcare business contributing around $773 million in sales. The proposed separation of the Consumer Business aims to streamline operations and improve profitability for Masimo’s healthcare segment.
