Masimo (NSDQ:MASI) stock lost a third of its value the morning after the company said it would spend $1.025 billion to acquire Viper Holdings, the parent company of Sound United.
Sound United is behind consumer tech brands making high-end sound and home theater systems, including Bowers & Wilkins, Denon, Polk Audio and Marantz.
“We see significant opportunities to cross-leverage technologies, bringing Masimo’s clinically superior solutions into the home and on-the-go as well as bringing Sound United’s premium technologies into the hospital to advance our hospital automation connectivity and cloud-based technologies,” Masimo CEO Joe Kiani said in a news release. “The technology and expertise within Sound United will serve us well as we aim to augment our Masimo SafetyNet strategy.”
Besides augmenting Masimo’s telehealth and telemedicine strategy that includes its upcoming Masimo Watch W1, Masimo said the deal will enable it to get more of its wearables on the shelves of major retailers, Kiani said during last night’s analysts call.
“Sound United unlocks access to large, well-established consumer channels of offering us immediate scale with leading retail establishments like Best Buy in the U.S. and Euronics in Europe,” he said.
The BTIG analysts headline their note on the deal, “MASI’s consumer tech acquisition leaves us with more questions than answers, strategy to be revealed later this year.”
“We were caught off guard by both the size and scope of this deal, as it is much larger than MASI’s past transactions and falls well outside traditional medtech. … We commend MASI’s willingness to make a major leap to fulfill a multi-year vision and understand the hesitancy to share more details for competitive reasons — but we are left with little concrete to point to over the near-to-mid-term that makes sense of this tie-up,” said Marie Thibault and Sam Eiber at BTIG.
Mike Matson at Needham & Co. also did not expect a positive reception from investors.
Sure enough, MASI shares were down more than 35% at $146.84 apiece by afternoon trading today. MassDevice‘s MedTech 100 Index, which includes stocks of the world’s largest medical device companies, was down 1.4%.
The news came on the same day that Masimo reported Street-beating Q4 earnings.
Masimo reported profits of $68.3 million, or $1.18 per share, on sales of $327.6 million for the quarter ended Jan. 1, 2022, for a bottom-line slide of 3% and top-line growth of 11% compared with the previous Q4.
Adjusted to exclude one-time items, earnings per share were $1.21, 11¢ ahead of the Street, where analysts were looking EPS of $1.10 on sales of $320.25 million.
For full-year 2022, Masimo expects revenue to increase to $1.35 billion and non-GAAP earnings per diluted share to rise to $4.34.
“While 2021 was a very challenging year in global healthcare and for millions of patients, we were able to help ease the burden on hospitals and caregivers by providing them with our breakthrough technologies,” Kiani said.
Kiani added: “We manufactured and installed record amounts of innovative products last year, building on our reputation for innovation, responsiveness and dedication to customers. As we enter 2022, we look forward to introducing new innovations and solutions to improve patient outcomes and reduce the cost of care.”
