Apple to buy Beats Electronics for $3.2 billion: Reports

By Mir Ubaid | Updated May 09 2014
Apple to buy Beats Electronics for $3.2 billion: Reports
HIGHLIGHTS

If the deal is finalized, it would be Apple's biggest purchase of all time.

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Apple Inc. is reportedly in talks to buy Beats Electronics, which is the company behind popular Dr. Dre's Beats headphones. It is being said that the acquisition might be finalized for $3.2 billion. If the deal does go through, it would be Apple's largest purchase of all time.

Beats Electronics was founded by rapper Dr. Dre and records producer Jimmy lovine. The company is most famous for its "Beats by Dre" over-the-ear headphones that are mostly used by rappers and celebrities. The headphone is a premium product and costs at around $300. Beats is generally known for making high-end headphones. 

Acquiring Beats Electronics might help Apple to increase its domination in digital music. The iPhone manufacturer is popular for its iTunes service since starting it in 2001. But, during the recent years, sales of digital music on iTunes have been reported to have been declining steadily.

Back in 2012, smartphone manufacturer HTC bought a 51 percent stake in Beats for $300 million. Later in 2013, HTC sold back the 25 percent of its share as the two companies ended their partnership. HTC had to sell its stake in Beats due to its plummeting smartphone marketshare and share price collapse. Critics say that if this deal between Apple and Beats does go through, Apple Inc. would effectively save HTC which is also its smartphone rival as the latter is still incurring loses out of the deal. After acquiring Beats in 2012, stock price of HTC fell almost 80 percent. HTC would have profited by a hefty $1.29 billion had it not sold its stake in Beats last year. 

HTC phones featuring Beats audio technology received good reception from consumers. Now, the purchase by Apple could potentially make iPhones and iPads favorites among audiophiles. Apple has a huge cash reserve of $159 billion which means spending $3 billion to buy a company which could make its products more premium wouldn't affect its reserves by much.

Apple continues to be the largest seller of digital music with its store operating in more than 100 countries around the world. Now due to competition from companies like Amazon and others, its market share has dropped recently. The new deal with Beats could also revive its iPod which has been losing popularity over the recent years.

Source: Financial Times, Via: The New York TImes

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Mir Ubaid

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