Sound United (B&W, Denon, Marantz) appears to be in trouble...

[Lee]

channelnews : Former Sound United Business Could Be “Discontinued” Next Year After Falling Revenues, No Buyer and Losses Claims New Director

Masimo executives are back calling their consumer audio business Sound United, with a senior executive on a conference call this week claiming that they will move the business into being a “discontinued operations” if and when the board decides “to no longer pursue a spin-off, of the this...

www.channelnews.com.au

 

[PYP]

Headlines can be poorly written and/or deceiving (bolding added below):

"According to US sources and ased on discussions with a highly credible source, the 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 already been been finalised.

According to accounting experts, that we have spoken to in the USA, we have discovered that when it comes to financial accounting, discontinued operations refer to parts of a company’s core business or product line that have been divested or shut down, and which are reported separately from continuing operations on the income statement as is the case of Masimo which is primarily a health Company that has recently undergone board room turmoil and does not want the Masimo Consumer business impacting their numbers going forward.

Apparently when companies merge or are hived off assets such as the Bowers & Wilkins, Denon and Marantz brands are divested off the main books of the Company, this will allow Masimo to give a clearer picture of how their health operation will make money in the future.

Discontinued operations are listed separately on the income statement because it’s important that investors can clearly distinguish the profits and cash flows of continuing operations from those activities that have ceased."

 

[PYP]

perhaps we are seeing the beginning of troubling larger pattern in the audio business:


https://www.frenchweb.fr/entre-cris...tionnement-devialet-renegocie-sa-dette/449423

Automated translation

Founded in 2007, Devialet has established itself as an iconic figure of French Tech, with innovations such as its D-Premier amplifier and the Phantom speaker. But today, the company is experiencing a financial crisis that is calling into question its future. Faced with a loss of EUR 15 million and a 20% drop in its turnover, Devialet, according to the information revealed by our colleague Challenges, initiated a conciliation procedure to reschedule its debts and try to raise new capital. Contacted by the Redaction of Frenchweb.fr, Devialet did not respond to our requests.

A critical situation

Despite his initial successes, Devialet struggled to regain the enthusiasm for its first flagship products. Recent launches, such as the Dione soundbar or Gemini II headphones, have failed to significantly boost sales. Faced with this situation, the company saw its historical investors, including Xavier Niel, Bernard Arnault, and Jacques-Antoine Granjon, being reluctant to inject new funds.

The crisis comes as Devialet seeks new growth drivers internationally, notably in China and the US. The hi-fi market, which is particularly affected by the current economic situation, complicates this diversification strategy.

 

[Rt66indierock]

Devialet isn’t a good example. Any review with measurements points out issues with their stuff. Sale killing issues.

 

[PYP]

Devialet isn’t a good example. Any review with measurements points out issues with their stuff. Sale killing issues.

Well, we may consider measurements but perhaps the consumers that are considering their active speakers (the potential growth area of their business?) don't care. I don't know. Just speculation on my part.

I think it would be helpful to look at the broader context of what appears to be plummeting sales for a number of hifi companies, Devialet included. Is this a story about the surge in purchases during COVID followed by a reduction in demand once people returned (mostly) to their previous lives? And/or is it a story about price elasticity? I assume this will become clearer during 2025 as brands are either discontinued (or put into hibernation) or get consolidated under a new umbrella company.

Does anyone have reliable data on the average priced of high-end audio gear over the last decade? The following is an interesting data point if true but perhaps irrelevant to the so-called high end:

Between 1977 and 2024: Audio equipment experienced an average inflation rate of -2.69% per year. This rate of change indicates significant deflation. In other words, audio equipment costing $20 in the year 1977 would cost $5.55 in 2024 for an equivalent purchase. Compared to the overall inflation rate of 3.56% during this same period, inflation for audio equipment was significantly lower.

 

[Rt66indierock]

Well, we may consider measurements but perhaps the consumers that are considering their active speakers (the potential growth area of their business?) don't care. I don't know. Just speculation on my part.

I think it would be helpful to look at the broader context of what appears to be plummeting sales for a number of hifi companies, Devialet included. Is this a story about the surge in purchases during COVID followed by a reduction in demand once people returned (mostly) to their previous lives? And/or is it a story about price elasticity? I assume this will become clearer during 2025 as brands are either discontinued (or put into hibernation) or get consolidated under a new umbrella company.

Does anyone have reliable data on the average priced of high-end audio gear over the last decade? The following is an interesting data point if true but perhaps irrelevant to the so-called high end:

Between 1977 and 2024: Audio equipment experienced an average inflation rate of -2.69% per year. This rate of change indicates significant deflation. In other words, audio equipment costing $20 in the year 1977 would cost $5.55 in 2024 for an equivalent purchase. Compared to the overall inflation rate of 3.56% during this same period, inflation for audio equipment was significantly lower.

It is a lot easier to assume many of these companies just don’t make competitive products.

 

[PYP]

It is a lot easier to assume many of these companies just don’t make competitive products.

sure, but I have the "Why" chromosome. I'm interested in the market. What do consumers want? How do demographics (especially age) affect that? Where is the potential for growth? Have some companies grown too fast or taken on debt too quickly during the boom years? Just a personal interest...

I'm pretty much done with buying equipment (although I have said that before ). My interest has shifted to how this business works (or doesn't).

 

[Another Johnson]

sure, but I have the "Why" chromosome. I'm interested in the market. What do consumers want? How do demographics (especially age) affect that? Where is the potential for growth? Have some companies grown too fast or taken on debt too quickly during the boom years? Just a personal interest...

I'm pretty much done with buying equipment (although I have said that before ). My interest has shifted to how this business works (or doesn't).

I have two Denon Home 350s in the dining room. They stream most services, but not Qobuz. I can can play CDs on my Marantz Network Player (ND8006) and merge the H350s to also play the CDs. At discount the H350 can be had for about $500 to $600 each.

I have a Bluesound Pulse 2i in the bedroom. It will stream the same stuff as the H350, and also Qobuz. It can be had for $600ish.

For DR and BR, I don’t need more. It’s easy and inexpensive. I’ve looked at Devialet and decided it’s not for me.

 

[Another Johnson]

Upscale Audio pushed Devialet hard when it was introduced. They may have even been the importer. I just looked at the Devialet spread on Upscale’s website. My impression is that their offerings are attempting to bring the appearance of high end to the wireless world, especially for those who are space challenged. I am not surprised that they are struggling, at least in the US. It’s hard to beat HEOS and BluOS.

 

[Rt66indierock]

sure, but I have the "Why" chromosome. I'm interested in the market. What do consumers want? How do demographics (especially age) affect that? Where is the potential for growth? Have some companies grown too fast or taken on debt too quickly during the boom years? Just a personal interest...

I'm pretty much done with buying equipment (although I have said that before ). My interest has shifted to how this business works (or doesn't).

Hard questions. Do consumers want you to know this information? And are the folks like Futuresouce Consulting who have this information willing sell it to you?

Do you really want to know HIFI as a category is declining even though luxury audio is growing?

 

[PYP]

Do you really want to know HIFI as a category is declining even though luxury audio is growing?

yes, exactly.

what is the definition for luxury audio? total system price > $x?

 

[Rt66indierock]

yes, exactly.

what is the definition for luxury audio? total system price > $x?

Components costing $5,000 plus.

 

[wgerman]

Masimo Responds to 'Speculative Articles' on Sound United

Masimo provided Strata-gee with a statement to counter "speculative articles" on the "discontinued operation" designation of Sound United

www.strata-gee.com

Masimo Responds to ‘Speculative Articles’ on Sound United​

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.

 

[wgerman]

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.

 

[PYP]

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.

Um, what???

 

[Rt66indierock]

Um, what???

You should probably pass on this. I'm not explaining how my profession classifies operations.

 

[PYP]

You should probably pass on this. I'm not explaining how my profession classifies operations.

@wgerman linked to an article that clarified the previous article and is in line with what I had suggested in my post #2 above -- that the headline was inadequate and the story poorly written.

My "Um, what?" referred to my amazement that a "reporter" would bold a direct quote. That isn't journalism. If you were the journalist, then my comment was indeed addressed to you (although I had not way of knowing that). Otherwise, not.

 

[Rt66indierock]

@wgerman linked to an article that clarified the previous article and is in line with what I had suggested in my post #2 above -- that the headline was inadequate and the story poorly written.

My "Um, what?" referred to my amazement that a "reporter" would bold a direct quote. That isn't journalism. If you were the journalist, then my comment was indeed addressed to you (although I had not way of knowing that). Otherwise, not.

That the OP misrepresented something is hardly news, we’ve been pointing that out for years. That channelnews got something wrong is not surprising.

Again, not a good post. Ted Green says he is not a journalist and is open about it. He writes a blog about audio news and can bold anything he wants. Masimo came to him to quell rumors about Sound United because the audio press is dumb. Ted is after all a former vice president of an audio company Onkyo. Why do think they came to him?

Please stop insulting people by calling them journalists. Journalism died with the Duke Lacrosse scandal in 2006.

 

[Lee]

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:

This appears to be splitting hairs and raises more questions.

If Masimo is so happy with the audio brands, why are they not included as part of core operations?

If they are happy with the audio brands and want to separate financials for Sound United, why not just report the audio as a separate division?

 

[Rt66indierock]

This appears to be splitting hairs and raises more questions.

If Masimo is so happy with the audio brands, why are they not included as part of core operations?

If they are happy with the audio brands and want to separate financials for Sound United, why not just report the audio as a separate division?

Lee it only raises questions if you don’t understand financial accounting in the US. Acquiring Sound United was a decision Masimo has not recovered from. The decline in stock price cost the founder his position on the board and he left the company. The audio companies are up for sale or will be spun off.