Apple Close to Buying Beats Electronics for $3.2 Billion

Photo Credit: Morguefile.com

Photo Credit: Morguefile.com

Break out the massive checkbooks! Apple Inc., is set to acquire the headphone maker and music company Beats Electronics for a hefty $3.2 billion dollars. If all goes well, the final deal may be announced as early as next week. If Apple acquires Beats, this will be the biggest acquisition to date! At the moment, the biggest acquisition has been NeXT Computer Systems back in 1997 for $400 million dollars. If acquired for $3.2 billion, Beats will have cost Apple almost eight times what Apple has ever paid for a company.

Beats Electronics LLC is a Santa Monica, California-based company. The company was founded in 2008 by music-industry executive Jimmy Iovine and hip-hop artist Dr. Dre. Beats have focused on making high-end speakers and headphones that offered a higher-quality experience and were sold at a premium. The company remains private; it reportedly posted revenue of $1.2 billion last year. That growth attracted a $500-million investment from private equity firm named Carlyle Group that valued Beats at $1 billion.

Beats Music charges $10 a month for access to its song library online. The company also partnered with AT&T to offer a $15-a-month family plan. The Beats brand is also licensed to others under the Beats Audio brand, and can be found in cars made by Chrysler, HTC smartphones and HP computers.

Analysts speculated that the potential of the streaming service may have been what drew Apple to Beats. “Apple must have felt they needed to do something dramatic,” said Wedbush Securities analyst Michael Pachter. Forrester analyst James McQuivey adds, “This is puzzling; you buy companies today to get technologies that no one else … or customers that no one has. They must have something hidden … under the hood.”

Music has long been one of the keystones of Apple’s business, with its iTunes store and the iPod music player that reignited the company’s growth more than a decade ago. Digital-Download sales fell for the first time last year as people turn to streaming services such as Spotify Ltd., Google Inc.’s YouTube and Pandora Media Inc. to listen to music, according to Nielsen SoundScan. “The age of digital downloads is basically over,” said Aram Sinnreich, a media professor at Rutgers University who studies the intersection of technology and music.

Should the acquisition go through, it would be ironic; Dre and Iovine came up with the idea for Beats by mourning the decline in sound quality ushered in by Apple’s own iPod and the MP3 era. Iovine said, “For convenience and speed, everyone sacrificed sound, the emotion of the music is almost unrecognizable to what is recorded in the studio.” He and Dr. Dre set out to market headphones that “reproduce as close to the sound I hear in the studio as possible.”

Shares of Apple fell 0.7 percent to $584.14 at 9:49 a.m. in New York today. Analysts also believe Apple is under pressure to deliver more hit products since iPhone and iPad sales are rapidly decreasing. Analysts including, Gene Munster of Piper Jaffray Cos voiced skepticism, said “We are struggling to see the rationale behind this move. Apple should use acquisitions to bolster its weak Internet services offering such as iCloud, not music.”

This entry was posted in News and tagged , , , . Bookmark the permalink.
You are not authorized to see this part
Please, insert a valid App IDotherwise your plugin won't work.

Leave a Reply

Your email address will not be published. Required fields are marked *