Yesterday’s announcement by Siemens that it will spin off its audiology and hearing instrument business as a separate, new publicly held company could be great news for the global hearing aid industry — but only if an independent, newly energized management team can overcome the complacency that has dogged the Siemens hearing business in recent years.
If the new entity fails to command a premium share price by raising its profile, kickstarting its growth, and regaining its historic leadership position in the hearing aid industry, it might just as easily be quickly gobbled up by a competitor or another conglomerate and disappear. If that happens it will be a sad day, because the hearing industry needs more dynamic independent competitors capable of driving new technologies into the marketplace at all price points and in all product categories.
In announcing its “Vision 2020” corporate reorganization, Siemens said it will streamline down to a limited number of strategic technology businesses — hearing aids not included. The news release announcing the move said the Siemens Audiology business, which includes U.S.-based Siemens Hearing Instruments, no longer fits comfortably within the portfolio of the holding company’s other businesses:
As part of its realignment, Siemens AG is preparing to publicly list its audiology activities in order to give the business an opportunity to better leverage its potential outside the company….Both its technology and its consumer-oriented market access limit synergy potentials with other Siemens businesses. In addition, anticipated technological developments at Siemens Audiology differ greatly from those of the company and its healthcare activities.
In announcing the plan to list the business as an independent public company, Siemens ended months of speculation about what the massive conglomerate intends to do with its hearing business. In 2009, Siemens put the hearing business up for sale in an auction for private equity groups, but cancelled the sale when the company deemed the top offer of approximately 2-billion Euros too low.
Since then, Siemens Hearing Instruments, once the world leader in hearing aids and audiology products, has reportedly seen its market share slip and has seemingly become a near-invisible step-child within the Siemens technology empire. Rumors have circulated on and off over the past two years that Siemens would make another attempt to sell the company.
But if a public offering is successful in establishing an independent Siemens Hearing Instruments business instead, the new entity will have the opportunity to reclaim its place as an industry leader. Simply asserting itself once again as a more active and highly visible member of “The Big Six,” the small group of hearing aid manufacturers who collectively control more than 90 percent of the global hearing aid business, would help jump-start the comeback.
There’s no doubt the business still has the critical mass to thrive as an independent company over the long term. Siemens still is a leader in hearing aid technologies, and its products are highly regarded for premium features and quality. And according to a lengthy analysis published last year by David Kirkwood of Hearing Health & Technology Matters, Siemens has hung on to the Number Three position in the industry with a 17 percent share of the $5.4 billion USD global wholesale hearing aid market, which would make it a billion-dollar-plus business, a healthy size for a newly public company.
A successful public offering on a high-profile stock exchange would draw new capital into the industry that could be used not only to jump-start growth but also to double down on R&D investments required to stay competitive in next-generation hearing aid features such as 2.4 gigahertz wireless connectivity with mobile phones and other consumer products.
Unfortunately, the five-paragraph news release provided scant information on where, how and when the new entity will be publicly listed and traded. There was also no mention of who might run the new independent company, or of how much independence from the mother ship it will truly have.
More details will surely be forthcoming in the near future. But if Siemens fails to follow through quickly on its commitment to establish its hearing business as an independent publicly listed company, don’t be surprised to see rumors of a sale or other disposal of the business resurface.
If that happens, we may end up looking back on it as yet another missed opportunity to ignite the kind of competition, innovation, and growth that has been lacking in the hearing aid industry in recent years.