Sound United Sold to Medical Supplier & What the Future May Hold

Sound United is an audio company that needs no introduction here, its portfolio is easily one of the largest in the market and includes heavy-hitters Denon, Marantz, Definitive Technology, Classe, Polk, HEOS, Boston Acoustics and most recently, Bowers & Wilkins. On Feb 15th, the legendary brand-collective announced that it will have a new owner as Sound United has just entered a definitive agreement to sell to Masimo Corp for $1.025 billion dollars. Besides the complete stable of brands, Masimo will acquire all Sound United assets including global and online distribution, retail and custom install channels, cloud-connected home ecosystems and Sound United’s R&D and industrial design.

Cue Obligatory CEO Press Statements

Sound United CEO Kevin Duffy says of the deal:

“We’re excited about this transaction and see significant potential in combining our expertise in consumer electronics and audio engineering with Masimo’s strengths in healthcare and monitoring. With our track record of industry-first innovation, best-in-class products, and a global distribution network, we are the ideal partner for Masimo to transform the consumer healthcare experience. I look forward to working with the Masimo team to enrich the lives of consumers.”

Masimo founder and CEO Joe Kiani says:

“I have long been a fan (and now proud owner) of Sound United’s iconic brands and am honored to steward them through the next generation of technological evolution. Masimo shares Sound United’s commitment to providing innovative, best-in-class products and experiences, with a relentless focus on improving the consumer experience.”

According to the official Press Release mutual benefits of the deal look like this: 

• Sound United’s iconic audio brands will benefit from Masimo’s expanded organizational resources to drive long-term innovation and development
  
• Masimo will benefit from access to Sound United’s consumer-centric brands, global omnichannel go-to-market expertise, connected cloud-based ecosystem, and ever-present relationship with millions of consumers.
  

What Parameters Can Sound United-Brand Fans Expect?

The deal came as a surprise to all of us at Audioholics. The initial reaction was disappointment, a natural reaction when faced with change to an already good thing. But there might be reason for cautious optimism. Sound United under DEI Holdings has a reputation for not being overly hands-on with the various brands it acquires, as each brand retains their individuality while benefiting from being part of a larger firm. Under Masimo however, the parent firm just got larger.

After some light searching to get an idea of the involved company's relative size, a couple of recent sources shows Sound United parent company, DEI Holding with revenue around $500-million per-year, a small part of that is likely Sound United. Masimo had a great year in 2020, with revenue at over $1-billion and 19% growth in the year of COVID-19. The pandemic has likely been good for medical supply company revenues.

Joe Kiani and Masimo Corp

I found nothing prior to the Sound United deal's press release connecting Kiani to the audio world. But no doubt, after buying one of the top audio companies in the world we have no reason to doubt the statement that he’s “...always been a fan.” Sound United seems like an oddly specific acquisition for a medical tech firm. But Joe Kiani is not just a Johnny-come-lately CEO dropped-in to fill a specific purpose at Masimo. Kiani is also the company’s founder and chairman of the board. He seems to be the charismatic entrepreneurial type of leader in the “noninvasive medical monitoring” market, complete with Elon Musk-like aspirations beyond running a successful company. But instead of outer space, Kiani's attention is toward saving lives from hospital error.

Originally from Iran, Kiani came to the US with his engineer father and nurse mother, the apple didn’t fall far from either parental-tree. After earning a degree in electrical engineering himself, he started his medical technology company, Masimo in 1989. The Masimo story is an Apple-like startup tale of humble beginnings in the garage of his own home. The company’s breakthrough was an innovation in pulse oximetry technology, a noninvasive way to measure blood oxygen in patients. So, Kiani seems to be no stranger to either electronics or lifelong dedication.

Alongside the success of his business, Kiani has been something of a change agent in medicine promoting what’s called the Patient Safety Movement. Starting in 2002 he began writing a series of pieces for the New York Times where he advocates for better management of medical suppliers for the sake of patient safety. By 2013 he founded the Patient Safety Movement Foundation, dedicated to eliminating medical errors that harm patients all over the world.

What do you think about the Sound United buyout? Please share your comments in the related forum thread below.

What's the Connection Between Patient Monitoring and Audio?

Apparently none, according to initial investor reaction. Masimo's NASDAQ listing didn't seem to share Kiani's enthusiasm about the Sound United deal. In the days immediately following the announcement Masimo stock took a serious nosedive. But is there method behind the purchase? Research analyst at Needham & Co, Mike Matson has this to say about the sell-off reaction to Masimo's acquisition:

“While we understand investors’ consternation over the Sound United deal, we believe that the sell-off was overdone and note that we expect the deal to be highly accretive to EPS, and we believe that investors get a free call option on MASI’s consumer pipeline.”

Obviously, Masimo and Kiani sees benefits in Sound United’s research. This wouldn’t be the first time the medical industry has employed home theater technology. Apple’s Steve Wozniak famously sold his company CL9, through which he designed CORE the first-ever programmable universal remote control, to a medical supply company called Caledon. Caledon used CORE to control X-Ray machines and other medical devices for over a decade after the sale in 1991. But what can expect from the union of two very different areas of technology?

Uninformed Speculation: Equipment I'd Like to see from Masimo/Sound United

• Voice-activated, multi-zone patient alarms that signals your duty-nurse's personal assistant, powered by HEOS
• A groundbreaking Denon smart-watch that monitors blood composition in ways Liz Holmes of Theranos could only dream about
  
• Acoustic heart monitoring with Dolby Atmos... "Hear every ventricle in immersive surround to pin-point problem-areas"
  

More serious speculation from those in-the-know have pointed to Masimo moving toward direct-to-consumer health monitors, which is an area that may benefit from wireless communication, in-ear technology and patents that Sound United may already hold. Brian Johnson, President of another medical technology company called MassMEDIC speculated on LinkedIn about the deal.

“I think it’s a wearables play for a company that needs more opportunities to put its sensors into use on the consumer side... The ear is a perfect diagnostics hub, and we all wear our headphones all the time.”

I know that “making the world a better place” is such cliched posture for technology startups that it’s been duly roasted by Mike Judge in his HBO comedy show Silicon Valley. But new health monitoring technology and a foundation dedicated to better and reduced cost to patient care, there might really be something to it in Masimo. But as another cliche goes... Business is business. Only time will tell if Sound United's sale was good for consumers and what will come of its various brands. But if Joe Kiani and Masimo brings half the passion to audio that they bring to helping the sick, Sound United might receive the care it deserves after all.