Apple Near Buying Beats Electronics for $3.2 Billion

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Apple Looking To Acquire Beats For $3.2 Billion

By MICHAEL LIEDTKE

SAN FRANCISCO -- Apple is orchestrating a $3.2 billion acquisition of Beats Electronics, the headphone maker and music streaming distributor founded by hip-hop star Dr. Dre and record producer Jimmy Iovine, according to a published report.

Citing people familiar with the negotiations, The Financial Times says Apple (AAPL) could announce the deal as early as next week. In its report posted online late Thursday, the newspaper warned the talks could still collapse if the two sides can't agree on some final details.

Both Apple and Beats Electronics declined to comment to The Associated Press.

The potential acquisition would add Beats Electronics' popular line of headphones and music streaming service to an Apple line-up that already includes digital music players and the iTunes store, the world's top music retailer.

If the deal is completed, it would be by far the largest purchase in Apple's 38-year history.

The Cupertino company has traditionally seen little need to buy technology from other companies, reflecting Apple's confidence in its ability to turn its own ideas into revolutionary products such as the Mac computer, the iPod, the iPhone and the iPad.

But Apple hasn't released a breakthrough product since its former CEO and chief visionary, Steve Jobs, died in October 2011. The innovative void has increased the pressure on Jobs' hand-picked successor, Tim Cook, to prove he is capable of sustaining the success and growth that turned Apple into the world's most valuable company and a beloved brand.

Cook has shown a willingness to spend more of Apple's money than Job ever did. Among other things, Cook began paying Apple stockholders a quarterly dividend and has progressively committed more money to buying back the company's shares.

Apple's pursuit of Beats Electronics is the latest indication that the company is having trouble generating growth on its own. Apple already sells Beats Electronics gear in its stores, giving the company insights into how much the trendy headphones and other audio equipment appeal to its customers.

The negotiations also are taking place as the music market increasingly tilts toward streaming and away from the downloads that once drove the success of Apple's digital music store, iTunes.

U.S. revenue from downloads -- which iTunes dominates -- dropped 1 percent to $2.8 billion in 2013, while streaming music revenue from the likes of Pandora Media (P) and Spotify soared 39 percent to $1.4 billion, according to the Recording Industry Association of America.

While downloads still command 40 percent of the market, streaming revenue now accounts for 20 percent of total revenue, up from just 3 percent in 2007.

Beats Electronics was founded in Santa Monica, California, in 2008 by Dr. Dre and Jimmy Iovine. Its headphones were manufactured by Monster Cable until the two companies parted ways in 2012. The headphones have become a bit of status symbol worn by celebrities as well as audiophiles.

In 2012, Beats bought streaming music service MOG, which it transformed and relaunched as Beats Music earlier this year. The launch was fueled by a landmark partnership with AT&T (T) that allowed up to five family members to pay $15 a month for the service as long as they were AT&T wireless customers. The deal broke the industry mold of charging each person $10 per month.

-AP business writer Ryan Nakashima in Los Angeles contributed to this story.

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militiaman2013

Beats headphone discontinued by manufacturer do to defects - LMAO spend another $$$ Billion Apple you morns.

May 12 2014 at 1:47 AM Report abuse +1 rate up rate down Reply
militiaman2013

I can Counts on all 3 fingers how much weed I'm gonna buy! Thanks Obama! Thanks Crapple!

Now Crapple (APPLE) is supporting the drug trade, I guess if your company loses all creativeness and you realize that even the sheep have better things to do than listen to noise pollution you gotta put those C notes somewhere.

We've heard this deal is just a cover up for the biggest weed purchase in history; Apple found that if it's employees are high day and night they will work for pennies and since they have not made anything new since the 1980's it'a a safe bet productivity is not an issue.

May 10 2014 at 1:47 AM Report abuse +1 rate up rate down Reply
cuervooro

No monopoly here. Beats is just a cheap product that the uninformed masses buy because someone with a little popularity wears them. Kind of like Air Jordons. Worth $12 and sell for $200. Where else do you think that yearly welfare check goes to?

May 10 2014 at 12:05 AM Report abuse rate up rate down Reply
Brian Workman

Isn't these kind of transaction's, pushing the monopoly questions!

May 09 2014 at 10:30 PM Report abuse rate up rate down Reply
Truwriter

Evr wonder why the political left worries about companies becoming too big unless it is the techie companies where people where sandals to work and gouge Americans for service and minutes?

May 09 2014 at 9:50 PM Report abuse rate up rate down Reply
Vinnie

I'll say it again, who in their right mind would pay that much money for a pair of freaking headphones? I'm sure my $20 pair work just as good.

May 09 2014 at 9:16 PM Report abuse rate up rate down Reply
imavege

What is the deal? What is so special about his industry? nothing.

May 09 2014 at 8:03 PM Report abuse rate up rate down Reply
militiaman2013

Another Corporation with a monopoly on garbage = noise pollution. Perhaps since Crapple has so much cash they just decided to give Dr.Dre (Dr LMAO) some reparations for all of the injustices to his people. The headphones are junk I tried a pair and they make your ears and head sweat, not good when combined with electronics but I'm sure Beats got a race card go ahead upon final inspection.

May 09 2014 at 6:18 PM Report abuse +1 rate up rate down Reply
markdavis660

10.) This also gives- as stated, Apple new generational cool!!!! Simply put Dr. Dre took a GIANT business risk with his own money, brand, career and business partner in deviating from his core business competency and “Beats” his competition the American way!!!

Stop Hating!!!!

May 09 2014 at 2:58 PM Report abuse +2 rate up rate down Reply
markdavis660

Well I guess I am the business non-emotional voice of reason here that says BRILLIANT Acquisition APPLE!!!!!! Here are a few reasons why.

1.) Apple and Beats represent a culture and its as much about purchasing a culturally driven BRAND with global market name brand recognition then the tech superiority.

2.) Apple has the cash and the innovative bandwidth to make the brand match the quality level it seeks.

3.) No smart manufacture builds a device that never degrades or that doesn't warrant being replaced or upgraded within cycles of three to four years bye it loyal customers and both companies have used this model to drive its continued or repeat sales to PERFECTION.

4.) Beats as a brand is fearcely recognizable among current and emerging youth demographics that represent a beautiful trending sales increase systemically over the next ten years and it is this that drives much of its current market valuation of 3.5 billion. These numbers are in Acquisition land are what are regarded as nirvana.....

5.) Beats as a market vertical sat on the same shelves as each of the competitors- including apples own in house items, mention in other comments and I am sure that according to APPLES internal purchase's for all items of this sort Beat's as a brand is the clear winner among the consumers who purchase at the brick and mortar as well as online sales levels. I say Beat's won out fair and square so to the victor goes the COIN!!!

6.) Apple has made no mention as yet that it will decrease the shelf visibility of competitor brands but I can imagine with apples now vested interest in the sales performance of the beats related items that apple will etch out a little more shelf space for the Beats items.

7.) Yes your correct Beats is a brand that is traditionally associated with the "URBAN" market however its that market that Apple has had a dickens of a time becoming a major systemic player in because of it's higher price points. This market sector although not the largest is highly coveted because it is know as geniuses market for most trend based acquisitions from fashion, liquor, music, automotive trends and more.
8.) This allows Apple to capture instantly many of the brand loyalty that is culturally associated with Beats at mid range price point and to instantly take much of the market share for that market sector away from those like DELL, SONY, BOSE!!!!!! Very aggressive move on it's competitors via a peripheral item that will now cost them a fraction of what it would have cost to elevate it's in-house brand or others that it might have collaborated with.
9.) As both brands are likely manufactured in the same places or region in China at a cost that has in the past represented half or close to half the cost to doing so in the united states or EU this cost can now be offset with the new margins and these items can now be produced domestically. This means domestic jobs, better quality for two Global market leaders.

May 09 2014 at 2:45 PM Report abuse rate up rate down Reply