Resmed has sold an underperforming software business focused on residential aged care to a US private equity firm for $707 million, about a third less than what it paid for the asset eight years ago, in a move analysts say reflects the risk that artificial intelligence renders it obsolete.
Resmed said the sale of MatrixCare, which provides software used to manage care, nutrition and payroll in nursing, senior living and retirement facilities, to Frazier Healthcare Partners, was part of a strategy to focus on its core sleep health business.
Resmed bought MatrxiCare for $US750 million ($1.08 billion) in 2018. It was among a string of software acquisitions, including US cloud-based software group Brightree, bought in 2016 for $US800 million and which it still owns.
However, analysts said the sale price was disappointing, given Resmed was not in need of a capital injection, and questioned whether the move reflected risks from AI to its software business.
Resmed manufactures sleep devices and masks in Australia and Singapore, which it says are protected under an international agreement that guarantees duty-free treatment for products that help people with disabilities.
“Resmed has a net cash position and the majority of the funds look like they will be returned to shareholders. We wonder if Resmed’s decision to sell at this multiple partly reflects possible risks of future AI disruption to its software business,” RBC Capital Markets analyst Craig Wong-Pan said.
The release of new sophisticated AI services, particularly on Anthropic’s Claude platform, has hit the market valuations of software companies this year on perceptions that the technology will be able to perform a lot of the same functions at a fraction of the cost.
Other players in the healthcare sector such as Pro Medicus have also been hit.
More changes to portfolio to come
RBC said the sale price at a multiple of 8.4 times earnings was well below the 25 times earnings when Resmed bought it, and below expectations that it could fetch a low double-digit to mid-teens multiple.
Citi said it expected further tweaks to Resmed’s cloud-based software portfolio in its residential care business. MatrixCare made $US220 million in revenue and $US55 million of operating profit in fiscal 2026, having grown from $US120 million and $US30 million respectively in 2018.
Resmed said the sale of MatrixCare would free up capital to be deployed elsewhere, while the net proceeds would be returned to shareholders, including through an accelerated share repurchase program, and used for general corporate purposes.
“Today’s announcement is about our disciplined approach to portfolio management and our commitment to driving long-term growth,” Resmed chief executive and chairman Mick Farrell said.
“By focusing on areas where we see the greatest opportunity for sleep health innovation and impact, we are strengthening our ability to deliver life-changing health technologies, improve patient outcomes and create value for our stakeholders,” Farrell said.
Resmed, which reports full-year earnings on August 6, said it still expected its residential care software business to deliver high single digit revenue growth in fiscal 2027. It also said its guidance for margins and net interest income was unchanged from its last earnings call on April 30.
The stock fell almost 1 per cent to $31.19 on Wednesday.
Resmed shares have rallied 20 per cent over the past month after hitting multi-year lows in early June as investors abandoned healthcare stocks following a string of bad news for blood plasma giant CSL and hearing device maker Cochlear. The stock is still trading about 20 per cent lower than it was a year ago.
Shares in Resmed were hit by a wave of short-selling in 2023 on concerns that Ozempic, the diabetes treatment that has become a popular weight loss drug, would reduce demand for sleep apnoea products, but they later bounced back.
Source: https://www.afr.com/companies/healthcare-and-fitness/resmed-sells-us-software-business-on-the-cheap-as-ai-threat-looms-20260708-p60dlq