Recently we reported that the Chief Financial Officer of Masimo who recently spun off their acquired Sound United business into a separate entity claimed during a recent call that the business could be “discontinued”, the comments came after another slump in profits.
At the time we were confused as to exactly what the comments of Micah Young, Executive Vice President and CFO actually meant, when he said, “With regard to our strategic review process, the board has not made a final determination of the manner in which the consumer business will be separated. If, among other things, the board anticipates treating the consumer business as a discontinued operation.”
Apparently, this story got US audio media in a tizz with avnirvana.com, who struggled to even get the ChannelNews name right taking a stab at our reporting.
They even moved to take down one of their stories that was based on our story that basically asked the question what Masimo management means by the use of ‘discontinued’.
Masimo has not commented officially, however we have been able to ascertain that ‘Discontinued’ is a US term that does not necessarily mean closing the business down despite the problems Masimo is having with their hived off consumer business.
According to US sources and ased on discussions with a highly credible source, the notion of a shutdown or outright discontinuation is completely misguided.
In fact, a move to “discontinued operation” has no impact on the day-to-day operations of any Sound United brand, nor does it change product and financial plans for 2025.
According to the source, budgets for the upcoming fiscal year have already been been finalised.
According to accounting experts, that we have spoken to in the USA, we have discovered that when it comes to financial accounting, discontinued operations refer to parts of a company’s core business or product line that have been divested or shut down, and which are reported separately from continuing operations on the income statement as is the case of Masimo which is primarily a health Company that has recently undergone board room turmoil and does not want the Masimo Consumer business impacting their numbers going forward.
Apparently when companies merge or are hived off assets such as the Bowers & Wilkins, Denon and Marantz brands are divested off the main books of the Company, this will allow Masimo to give a clearer picture of how their health operation will make money in the future.
Discontinued operations are listed separately on the income statement because it’s important that investors can clearly distinguish the profits and cash flows of continuing operations from those activities that have ceased.
This distinction is especially useful when companies merge, as parsing out which assets are being divested or folded gives a clearer picture of how a company will make money in the future.
So where is the Masimo Consumer business going.
According to insiders the business is still up for sale and the Masimo board is still engaging with various parties, with price believed to be a sticking point.
During a recent global hook, up the business spelt out a bright future for the Bowers & Wilkins, Denon and Marantz brands with Denon products now flying off the shelves at JB Hi Fi.
We are also aware that the business that has several new products on the horizon after recently launching a new round and very stylish Marantz speaker that comes with its own stand.
We understand that there is no intended to sell off the Bowers & Wilkins, Denon, Polk Audio, Marantz, Definitive Technology, Classé, and Boston Acoustics brands separately.
One option being evaluated is whether they float the entity as a totally separate business, with Masimo still holding shares in the business as a means to get back value, after their former and now deposed CEO Joe Kiani paid over $1.2 billion dollars for the business.
Four months ago, Masimo executives claimed that a potential joint venture partner is prepared to offer $850 million to $950 million for its consumer business, which includes health and audio products, some observers claim that the health Company should have taken the deal with the value now tipped to be sub US500M.
At the time Masimo and the potential partner, which it did not name, were in active discussions regarding the terms of the joint venture with two names floated as potential partners, including Bose who has just acquired the MacIntosh Group which includes Sonos Faber and Apple who are still in a fight with Masimo over patents and Oxygen technology for Apple watches.
Masimo is still engaged in their legal battle with Apple over the patent dispute and the use of blood oxygen sensors in newer Apple Watch models, forcing the iPhone maker to sell the devices without the feature.
Masimo is also looking at trying to negotiate a higher price for its consumer business than what is being kicked around the industry with several observers trying to work out what is a fair and reasonable EBITDA valuation for the business actually is.
in the three months ending September 28, 2024, recorded a revenue decline to US$161.4 million vs $171.5 million in the same period in 2023.
The Masimo consumer business also reported a net loss of $12.9 million during the quarter ending in September 2024.
In the same period in 2023 the Company reported a loss of $17.8 million.
As a footnote the disposed CEO of Masimo Joe Kiani was a close friend of out going US President Joe Biden, he was also a major donor to the Democrat Party and Kamala Harris’s recent campain for President.
