Unfounded Rumors Feed Speculation that Sound United Will Be Shutdown, Here’s the Real Story

(November 26, 2024) This past September, Sound United’s future under the stewardship of Masimo, a publicly traded medical tech company known for advanced monitoring devices, came into question. For background, you can read more about that here, but the important takeaway is that financials and changes to its board actively drove a wedge between Masimo, its stakeholders, and Sound United. Of course, that news kicked a hornet's nest of speculation, leading many to assume Sound United's days with Masimo were in short supply.

Masimo has been rather quiet about the situation, which made this report by the Australian outlet NewsChannel all the more explosive. Headlined as Former Sound United Business Could Be “Discontinued” Next Year After Falling Revenues, No Buyer and Losses Claims New Director, the report highlighted a statement attributed to Micah Young, Executive Vice President and CFO, which impart 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.”

Without an expected buyer publicly identified, a reported decline in sales revenue, and armed with the phrase “discontinued operation,” NewsChannel and two spinoff articles published by German news sources concluded that Sound United and its brands’ business activities could be discontinued or shutdown in a matter of months.

If you read my original (since retracted) article dissecting NewsChannel’s conclusions, you’ll know I, too, read “discontinued operation” as an ominous sign. In part, writing:

Keywords in that statement are "anticipates" and "discontinued operation." Does this mean brands like Marantz and Denon will cease operations entirely? Does Young mean to say Masimo will take drastic restructuring steps to salvage select portions of the business? Or, does it simply mean Masimo anticipates a sale to be completed early in the year, thus shedding operations from Masimo's books?

Objectively speaking, the notion of a complete shutdown or brand discontinuation makes no sense. Yes, we’ve witnessed a change in market dynamics within the consumer electronics segment over the past several years. And, yes, sales may have declined across the industry, but Sound United delivered fantastic products during 2024, and, in many respects, its brands remain market leaders – there isn’t a logical scenario where all of that just disappears.

Now, if you regularly swim in financial circles, then you likely know the phrase “discontinued operation” has little to do with turning off the lights, boarding up the windows, and calling it a day. It is, in fact, accounting terminology that reflects how Sound United is classified in Masimo’s overall financial statements. It’s basically a tool used for transparency that will allow investors to evaluate Masimo’s core healthcare business better.

Based on discussions with a highly credible source, this 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 been finalized, and Sound United brands have exciting new products on the horizon. In other words, the brands, their products, and the teams behind them are healthy and moving forward with dedicated roadmaps.

As for the current status of Sound United, Masimo is continuing to explore its options and, most importantly, plans to keep all brands under one portfolio. I'm told several outcomes are still being evaluated, including an outright sale, keeping Sound United under Masimo’s control, or spinning it off into a publicly traded entity.

So, yes, the future of Sound United’s ownership remains uncertain, but the brands are not in distress; operations are running normally, and brand managers are poised to continue delivering innovation and quality. Take a breath and let the process play out. In the meantime, plan on Sound United remaining a big player in the home theater and audio segment.


Related Reading:

• Is Sound United on the Ropes? Today's Events Increase the Likelihood of a Sale, But to Whom?
• Marantz Horizon Series: A Stunning and Unique Fusion of Art, Sound, and Modern Convenience
• Denon Refreshes Its Flagship AVR, Meet the AVR-A10H
• Marantz Raises the Bar, Launches New Flagship Model 10 Reference Integrated Amp
• Sound United Gets... Acquired? Yup, Industry Giant Enters Agreement with Masimo Corp

 

[Sonnie Parker]

I knew I wasn't going crazy when I read this title, and it was a similar article to what you previously retracted (and I fully understand why). I was searching around for my post and it had disappeared. Before I read this new post, I was scratching my head at what happened to the previous thread; then it dawned on me what happened as your new thread title sunk in.

You are right. There is no logical reason for the brands to disappear, and I could never imagine them shutting down before getting scooped up. However, I can still see staff getting a bit antsy about what might happen, as you can't help but have thoughts running around in your mind as the first news landed, even if it was somewhat misguided with the supposed rumors. One thing is for sure, and two things for certain: they need to use a phrase other than "discontinued operations", as it could leave one wondering... just sayin'.

“Discontinued operations” is a term in financial accounting. It refers to parts of a company's core business or product line that have been divested or shut down. They are reported separately from continuing operations on the income statement.

Perhaps "shut down' doesn't really mean shut down in financial accounting.

 

[Todd Anderson]

Sorry about that… I thought it was best to pull and rewrite.

So, that term. I totally agree. But, it really wasn’t meant for public consumption in the manner that it’s been used. It’s solely intended for investors. In fact, Masimo had to float an internal memo explaining the definition, just so employees wouldn’t panic.

The larger conversation really needs to be about the market and what younger generations of buyers are purchasing. Or, at least, what they’re being exposed to.

I have some ideas about pop-up experience centers inhabiting empty retail space… strategically positioned in urban areas where younger generations live.

But also, these companies are going to need to find ways to satisfy convenience, ease of use, and cost.

 

[Sonnie Parker]

Yeah... I suspect there were employees already panicking. That memo was probably to calm the panic. I'm sure minds are wondering right now.

Sales were down considerably, so a chain reaction of events started.

Overall, the consumer electronics industry is steady or rising, with the exception of 2022, which was probably the after affects of the crazy boom in 2021. 2024 is slightly down... if you can call 5.3 billiion slight.

Of course, home audio is probably only a small percentage of consumer electronics. I have no idea how accurate AI is, but:

According to available data, home audio currently represents a relatively smaller portion of the overall consumer electronics market, with estimates suggesting it makes up around 10-15% of the total consumer electronics market share, with the largest share within home audio belonging to speakers and systems, driven by the growing popularity of smart speakers and streaming services.

Denon and Marantz are certainly household names. B&W has been around for a while. Maybe poor marketing is at fault.

I wonder how Sound United sales compare to the other major groups/companies.

 

[Todd Anderson]

Yeah, the CE market is strong, but the market for more traditional receivers, speakers, etc., hasn't been as healthy. It's just a shift in how people consume music.

I'm not sure if someone has pulled together data for different companies...I'd love to see it!

 

[Matthew J Poes]

What do you say Todd, want to pull in some friends and buy Sound United?

I've privately had this same discussion with folks in the industry. Massimo probably never should have bought SU, it wasn't sensible beyond the CEO's passion. But there is nothing fundamentally wrong with these brands and their loss would be absurd.

 

[Todd Anderson]

I don't know Matt... because what I'd ultimately do with the brands might not be too popular! Don't get me wrong. The brands are fantastic. However, at some point, a pivot needs to be made to address the slumping sales.

I agree with you. Sound United was a weird fit within Masimo. I guess it was better off there, as opposed to private equity ownership. But, it's certainly been a poor match for investors that are primarily focused on medical devices.

I often wonder if Masimo planned to integrate health monitoring into the HEOS ecosystem. Or, if the HEOS technology framework was viewed as something worthy of pulling into Masimo's product line?