Masimo Negotiating Consumer Deal As Watch Technology Comes Into Play

The sale of the former Sound United audio Company acquired by Masimo in 2022 has now become a key priority for the Masimo board following a changing of the guard at the US health Company with the inclusion of a consumer version of the Masimo watch and its unique Oxygen measurement technology in the consumer version set to play a key role in any potential acquisition.

On Friday there was a massive spill of the Companies board, with shares surging close to 9% after founder and CEO was defeated in his attempts to keep control of the Company and above all control of the former Sound United business that has been moved into a separate entity.

The Consumer Business will include Masimo’s consumer audio products including Bowers & Wilkins, Marantz, Denon, Polk and the and consumer health products, including the Stork baby monitor and the Freedom smartwatch and band.

The new Masimo management are now seeking to complete the separation as soon as feasible, subject to completion of due diligence, completion of definitive agreements, submission and clearance of filings with the Securities and Exchange Commission, and the receipt of other applicable regulatory approvals.

Masimo shareholders elected Politan Capital Management’s two candidates to the board in a defeat for CEO Joe Kiani.

Politan’s win points to the likely departure of Kiani, (Seen below) who started the company 35 years ago and holds more than 900 of its patents.

The hedge fund accused management of “broken” corporate governance under Kiani and that the acquisition of Sound United was a foolish move that saw Masimo shares slump 40%.

Kiani was heavily criticised following the A$1.4 billion acquisition of the consumer audio products company with Politan management blaming the acquisition for Masimo’s stock underperformance.

Masimo saw Sound United’s consumer expertise as a way to expand beyond traditional healthcare channels but ultimately decided to pursue a separation of the consumer business, a move that Politan has said it supports if “done right.”

During the explosive AGM it was revealed that Masimo is in advanced discussions with potential joint venture partners for the consumer business however analysts claim that they could end up only getting 60-70% of their original purchase price back.

The unlock key could be inclusion in the Consumer division’s assets of the Masimo Consumer version of their health Watch incorporating its pulse oximetry technology, which Apple was desperate to get their hands on Prior to Masimo cutting a deal with Google and Qualcomm hours out from the Companies AGM.

Google and Qualcomm are set to incorporate Masimo’s biosensing tech to Wear OS smartwatches.

Ironically new Apple Watch Series 10 doesn’t have blood oxygen features in the key US market after Masimo sued Apple.

The Verge claims From the outside, it sort of looks like the company battling Apple over blood oxygen is now setting the terms for how that exact tech is used by Apple’s smartwatch rivals. Securing the bag, so to speak, against other alleged patent infringement.

The deal with Google and Qualcomm rules out a potential takeover of the Masimo audio business by Apple which analysts were speculating on prior to the deal with Apple’s rivals being cut.

Masimo CEO Joe Kiani says that’s not exactly how he sees it. As part of the deals, Masimo is creating a reference platform where its tech is embedded in Qualcomm’s smartwatch chip and the Wear OS platform.

“We see it as a way of giving people continuous, accurate monitoring so they don’t have to try to maybe rip us off,” Kiani says in a call with The Verge.

“We’ve done this because we see a world where people really want these wearables for accurate SpO2, for real scientifically based sleep apnea and sleep analysis, measuring hydration, all kinds of things.”

Kiani contends that ensuring accuracy across the market is the real goal, touting Masimo’s medical pedigree. He has a point. Masimo’s tech is FDA-cleared, meaning the agency has evaluated and vetted Masimo’s accuracy claims across a wide range of variables. This isn’t the case for the blood oxygen sensors in most consumer-grade smartwatches.

That’s because blood oxygen data is largely presented as a wellness feature. It’s nice data to have, but you’re not meant to make any major health or medical decisions based on it.

Currently Masimo is working on its own Wear OS watch, the Freedom with the device set to be launched in Australia.

“Not only do we have FDA clearance for the statements we’re making, but every OEM that goes through us, we’re going to do a verification and validation to see that their implementation is as good as ours,” Kiani says.

He also notes that Masimo will also help companies navigate the FDA regulatory process.

At this stage Apple remains stubborn about not licensing Masimo’s tech, meaning Apple Watches in the US won’t have blood oxygen monitoring until the patent dispute resolves or the patent itself runs out in 2028.

Wear OS watch manufacturers are tipped to start adding them in the next year or two to their devices running the Google OS.

Kiani has declined to name any potential partners but hinted that some announcements may be coming soon.

Masimo itself is also working on a Wear OS smartwatch, pointedly called Freedom, that it showed earlier this year at CES. area where TSMC excels.