Masimo Takes Over Assets of Spire - Analyst Blog

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Masimo Corporation ( MASI ), a leader in non-invasive monitoring technology for patient care, recently revealed that it took over a substantial portion of the assets of Spire Semiconductor, LLC. Spire manufactured sophisticated component level items and light emitting diodes.     

Masimo Semiconductor Inc., a recently set up, fully-owned subsidiary of Masimo Corporation, will run the segment going forward. By taking over Spire Semiconductor, Masimo acquires the capability to create custom components as well as speed up product development.

Based in Hudson, New Hampshire, Masimo Semiconductor focuses on areas such as device fabrication and foundry service for telecom, biomedical, consumer items and other segments. It will continue to develop cutting edge capabilities in laser diodes, optoelectronic parts and other know-how.   

Spire Corporation is a versatile entity catering to the biomedical, telecom and other industries with offerings derived from a common technological base.

Masimo's Signal Extraction Technology ("SET") offering may help it become a dominant global player in the pulse oximetry market. The addition of non-invasive parameters is expected to act as a long-term barrier to entry and drive substantial growth. The expanded pulse oximetry utilization into non-critical care areas of hospital represents another growth driver. Shipments have been growing at a steady pace fueled by new contracts.

The company's products enjoy a large potential market size. The Masimo SET targets a critical care and general floor market; each estimated at about $1 billion. The Rainbow SET is also aimed at a large market. The international arena is another burgeoning opportunity for the company. Its multi-year investment to build an international sales organization continues to gather strength. 

Masimo is well positioned to deliver healthy growth over the next few years with an increasing proportion of recurring revenues (coming from sale of consumables). Recurring revenues are driven by steady growth in the installed base of the company.

The renewal of the royalty agreement with Covidien ( COV ), but under fresh terms, has reduced royalty receipt in recent quarters. Also on the negative side, a weak macro environment raises concern and competition remains intense. Moreover, Masimo partly depends upon its OEM partners for sales.

The company's current valuation reflects high short-term expectations from its hemoglobin monitoring technology. However, in reality, uptake of the hemoglobin monitoring device may be uneven.

Masimo already enjoys a high valuation. The stock is expensive, which reflects its robust growth prospects. As a result, we anticipate limited upside to the share price from current levels. We are currently Neutral on Masimo. The stock currently retains a Zacks #3 Rank, which translates into a short-term "Hold" recommendation.


 
COVIDIEN PLC ( COV ): Free Stock Analysis Report
 
MASIMO CORP ( MASI ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: COV , MASI

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