Masimo Responds to ‘Speculative Articles’ on Sound United

‘Discontinued Operation’ is a Financial Reporting Designation

Late Tuesday, Masimo’s communications team reached out to Strata-gee to provide a statement designed to counter or otherwise address unspecified “speculative articles” on the recent pronouncement from Masimo CFO Micah Young that the Sound United division may end up being treated as a “discontinued operation” if the Board decides not to spin it off as a publicly-traded company.

Why are people speculating about that? Read on…

See more on the Sound United ‘Discontinued Operation’ controversy

Note that Masimo’s communication to Strata-gee made it clear that Strata-gee was NOT one of the outlets that committed this error of unsupported speculation, saying directly, “…thank you for not speculating and reporting only on facts.” However, I am aware of some comments in other articles, or especially on social media, that offer sometimes wild theories on what the phrase “discontinued operation” really means.

Addressing Rampant and Largely False Speculation about Sound United

In fact, prior to receiving the communication from Masimo, I had considered posting an article to explain just what CFO Micah Young meant by that phrase. Now that I see Masimo is also aware of this rampant speculation, I can understand why they feel the need to respond.

First, let’s review just exactly what CFO Young said, as reported in my article earlier this month:

We will continue to update the market on the work of the management team, in partnership with the board’s Business Review Committee. We expect to provide the next update in January 2025. 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 decides to no longer pursue a spin-off of this business into a publicly traded company. We anticipate treating the consumer business as a discontinued operation. Upon those decisions being finalized, further, we would exclude the results for this segment from our non-GAAP earnings, and no longer provide guidance for this segment if it still remains with the company into the first quarter of 2025

MIcah Young, Masimo Chief Financial Officer

Change in Financial Reporting Standards Only

Note that the highlighted emphasis of the “discontinued operation” statement was done by me…it was not in the original text. I did that to emphasize that it appeared that a change in the status of the division may be impending, and I didn’t want the reader to miss it.

However, some readers and other media have misinterpreted the statement to suggest that perhaps Masimo was intending to literally shut down the division. This speculation has run wild and I have responded to several industry folks who have reached out to ask me about it.

Masimo CFO Was NOT Referring to Shuttering Sound United’s Operations

Some kind of business closure or shuttering is NOT what Micah Young was suggesting. Changing the classification of Sound United to a “discontinued operation” is a financial maneuver that affects how its financial performance will be properly reported in the future in accordance with appropriate SEC rules. It does not mean that operations are ceasing.

In response to the rampant speculation, the company provided a statement, attributed to Masimo’s Consumer Division Chief Operating Officer:

The ‘discontinued operation’ classification simply reflects an accounting adjustment related to how the consumer business is included in Masimo’s overall financial statements. It has no impact on the day-to-day operations of the consumer audio business, our products, or our level of service. As Masimo has indicated, the Company’s Board and management team are working hard to find the right home for our audio brands and then identifying the best path forward to get there. We remain committed to developing and supporting our market-leading brands, delivering the exceptional audio experiences our customers know and love.

Blair Tripodi, Masimo Consumer Chief Operating Officer

Company has Recently Launched New Products; Product Roadmap ‘Alive and Well’

Is it “business as usual” at Masimo Consumer (Sound United)? I would suggest that you consider the fact that the company recently announced new Marantz loudspeakers – the Marantz Horizon and Grand Horizon – high-end speaker models. Also consider the new Marantz 10 Series launched not that long ago at the end of August. It is highly unlikely that new products from Sound United would be launched in early-to-late Fall if the company was planning on closing operations anytime soon.

Not only that, but company representatives tell me that the ongoing product roadmap “is alive and well,” suggesting more new models are in the works.

It’s Business as Usual as Company Seeks to ‘Find the Right Home’

To be sure, Sound United’s future is a bit up in the air as the company looks committed to, as Tripodi put it, “…find the right home” for them. But shuttering the operation would make little sense as it would represent a total loss for the company on its $1+ billion investment in Sound United. Furthermore, Young has previously said multiple parties were interested in the audio brands, so there is just no reason to believe that any of the potential options that Masimo is considering would include a total shutdown or liquidation.

I think that a lot of the hubbub engulfing Sound United is the result of a compounding of stories surrounding audio companies, including VOXX/Premium Audio Company and the recent acquisition of McIntosh by Bose. These have served to add undue emphasis on the changes taking place within the Masimo universe.

Only a Financial Reporting Standards Change

Calm down, everyone… A clear-eyed view of Micah Young’s statement suggests folks don’t need to be overly concerned about a change in financial reporting standards as a result of this “discontinued operation” classification change. Yes, many (like me) are concerned to see where Sound United will end up, but for now, they assure me they continue to operate with full vigor daily while the Board sorts out its longer-term future.

Learn more about Masimo by visiting masimo.com.