Apple close to buying Beats Electronics for $3.2 bn
09 May 2014
Apple Inc is close to buying premium headphone maker Beats Electronics for a record $3.2 billion, the iPhone maker's biggest acquisition to date, the Financial Times reported yesterday.
The report said that the deal could be announced as early as next week, but added that some details are yet to be agreed.
The acquisition would include both the streaming Beats Music subscription service and the division that produces headphones and speakers.
But the cash-conservative iPod and iPhone maker is paying over the hill for Beats, which was valued at around $1 billion late last year when private-equity firm Carlyle Group invested $500 million for a minority stake in the company. (See: Carlyle to acquire minority stake in Beats Electronics for $500 mn)
Beats had parted with its technology to Apple's rival smart phone maker HTC of Taiwan, which had acquired a 50.1-per cent majority stake in Beats in 2011 for $309 million.
HTC sold 25 per cent, in less than a year later, back to the company's founders, rapper and hip-hop producer Andre "Dr Dre" Young, and music producer Jimmy Iovine, for $150 million.
As part of the investment, HTC used Beats' headphones and audio technology into its own smart phones.
In 2006, Iovine and Dre set out to solve the problem of poor sound quality caused by the digital revolution combined with the proliferation of cheap ear buds bundled with MP3 players, laptops, mobile phones and other portable devices.
Their solution was founding Beats in 2008. Beats portfolio comprises the Beats by Dr Dre family of premium consumer headphones, earphones, and speakers as well as patented Beats Audio software technology.
Beats currently has more than 64 per cent per cent market share of the $100-plus premium headphone category in North America, according to data provided by NPD Group.
Its products are used in Chrysler vehicles, Hewlett Packard computers and monitors, and HTC smart phones, and are also being sold in Apple's retail stores.
Last month, Beats launched a subscription streaming music service using Apple's in-app purchase, which competes with iTunes Radio.