Samsung Electronics (005930.KS) announced that it agreed to purchase the non-medical division (audio) business of Masimo (MASI), a company known for its healthcare products and an ongoing legal battle with Apple (AAPL) over the use of its wearable pulse-ox technology.  The purchase, which is expected to close before the end of this year will make Samsung’s Harman division the largest consumer audio company and will add to Harman’s strong presence in the automotive A/V market.  As shown below, Harman, which Samsung purchased eight years ago for $8b (a hefty 37% premium at the time) is a heavy-weight in both the consumer and automotive audio markets, and with the additional brands owned by Masimo, will extend its footprint in both markets.
The Harman division of Samsung, while a small part of sales (4.3% in 1Q ’25) and op profit (4.5% in 1Q ’25) is an adjunct to Samsung’s automotive business, which includes OLED displays (Samsung Display (pvt)), infotainment processors, image sensors (driver safety), DRAM & NAND for ADAS, and MLCC (Multi-layer ceramic capacitors).  While we don’t have access to detailed data on the non-medical part of Masimo’s business, we know that in 1Q of this year the company produced $146.7m in sales and generated a $6m pre-tax loss[1], somewhat better than 1Q ’24 where sales were $153.2m and generated an $18.5m loss. 
Samsung is paying $350m for the Masimo assets, which we believe is between 0.5x and 0.7x annual sales, a substantial discount to more typical 0.6x to 1.1x for these types of companies, although when Masimo purchased what were then the audio assets of Sound United () for $1.025b, the multiple was 1.6x to 1.7x.  Current long-term CAGR for segments in the audio space remain high (see below) but we believe those are optimistic, even so it seems Samsung was able to purchase these assets at a significant discount.  If they are able to leverage the Masimo businesses as they did with Harman, they should be able to move most of these new brands to profitability as they fall under Samsung’s broad advertising campaigns and substantial reach into Asia, where growth in the audio space is highest.


[1] Excluding all impairment charges.

​Recently we noted that Samsung (005930.KS) was one of the only major CE manufacturer that does not offer Dolby (DLB) Vision™ across its TV line, instead developing its own HDR 10+ high-definition video format in conjunction with 20th Century Fox (DID) and Warner (WBD).   These systems increase image brightness and contrast relative to SDR (Standard Definition), along with increasing the color palette, and adjust image parameters on a frame-by-frame basis, rather than fixing a group of settings for the entire content duration, as is the case in SDR.  What makes the Samsung and Dolby systems different is that Dolby Vision has to be licensed by the content creator (typically a one-time fee) and by the device manufacturer (typically a per unit fee), while the Samsung system is open source and therefore free to use.
It seems that Samsung is taking this concept further and has just announced that it will be including Eclipsa™, its open-source spatial audio system, across its entire TV line in 2025.  This system is in direct competition to Dolby’s Atmos™ spatial audio system and similar ones from DTS (DTSI), Sony (SNE) and others, including Apple (AAPL), although Apple’s Spatial Audio is primarily used in its own products as it is closely tied to the OS. 
These audio formats are object oriented, meaning that they isolate each sound, whether it is a voice, music, thunder, gunshot, etc. and allow it to be placed in a three-dimensional space, as opposed to the left/right two-dimensional space used in stereo recordings.  By adding the dimensions of ‘height’ and depth to the audio, a more realistic portrayal of the sounds can be created.  In a typical stereo (2 channel) playback system the sounds are placed horizontally between a left and a right speaker at the time of mixing, or can be mixed in a  ‘surround’ format, typically adding a set of rear left and right channels.  Systems such as Atmos or Eclipsa take that information and make each sound into an object by sampling the audio 48,000 times each second and breaking the audio into objects rather than forcing them into two or four channels.  The systems can then place each object anywhere left/right, front/back, and above/below, creating a more realistic 3-dimensional playback that more closely matches the screen.
These systems typically use speaker systems that include the usual left and right front (and a center speaker as most dialogue originates from center stage), a pair (L & R) of rear speakers, and a height speaker, but they also have to be able to be used on generic stereo systems, such as the TVs own two speakers or headphones. In order to do this, these systems use a number of tricks to fool the human brain.  Delaying (Milliseconds) some objects in one speaker can make it seem like it is further ‘back’ on one side than the other and reducing the volume of an object can have a similar effect, while filtering (changing the tone) of an object can seem to move its location, but the full effect of object-oriented audio is found on the type of speaker set-up described above.
Samsung’s Eclipsa system is an outgrowth of IAMF (Immersive Audio Model & Formats), an audio format it has been developing with Google (GOOG) since 2020 to improve on the ability of other object-oriented audio systems, particularly when used on 2 speaker systems.  At least that is the stated objective, but the fact that Dolby (and others) charge a license fee to use their systems seems to be a big factor, with Samsung unwilling to pay to license such systems when it believes it can produce its own. 
However, while 3D audio market statistics are few and far between, we believe Dolby has had the dominant share and the only way a new competitor can make any headway in said market would be with an open source, and therefore free offering, which is the route Samsung has taken.  Of course Samsung will offer the system across its own TV set lines but will have to convince other CE brands that it can do at least what Atmos can do, without the fees.  Industry organizations, particularly the Alliance for Open Media, have been advocating for royalty free codecs for almost 10 years but has focused primarily on video codecs so Samsung and Google, both AOM Steering Committee members, must get the ball rolling. 
Should their members get behind the Samsung/Google IAMF framework, it would stand as a direct competitor to Dolby Atmos, and since the Alliance for Open Media has participated in the development of IAMF, there is such a possibility.  That said, we note that it is ultimately up to content creators to decide what format they  wish to use, so it will take more than sponsorship from the AOM steering committee members or rank-and file supporters before real adoption is afforded to the new system, but the good news is that it is free, making it available to hardware and software manufacturers, who will not have to pay to build encoders and for CE brands to build decoders into their products, as Samsung is doing.  Its hard to battle an incumbent as entrenched as Dolby, but ‘free’ usually helps.