Apple set to buy headphone-maker Beats Electronics for $3.2 billion

May 09 2014, 13:13 IST
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Apple is reportedly foraying into music streaming and headphone gear businesswith acquisition of Beats Electronics. (Reuters) Apple is reportedly foraying into music streaming and headphone gear businesswith acquisition of Beats Electronics. (Reuters)
SummaryApple Inc acquisition of Beats would mark a departure for usually cash-conservative iPhone maker.

Apple Inc is close to paying a record $3.2 billion for Beats Electronics, two people with knowledge of the matter said, an expensive foray into music streaming and headphone gear that would mark a departure for the usually cash-conservative iPhone maker.

Both companies are hashing out details and the envisioned deal could still fall through, one person told Reuters on condition of anonymity because the discussions were private.

A second source familiar with the matter told Reuters that Apple was in the market for a subscription-based music service to complement its "iRadio" ad-based offering, launched in 2013 as part of an attempt to jump into a music-streaming arena then split between a handful of startups such as Pandora Inc.

Founded by rapper Dr. Dre and legendary music producer Jimmy Iovine, Beats Electronics is best known for its "Beats by Dr Dre" line of trendy headphones that vie with the likes of Skullcandy Inc, Sennheiser Electronic and Bose Corp.

Dr Dre-headphones

Beats is best known for its 'Beats Electronics by Dr Dre' line of trendy headphones that vie with Sennheiser and Bose.

This year, it launched a music service that has won plaudits for its slick design and human music curation, versus the computer-algorithms that determine playlists for most of its rivals.

But analysts on Thursday questioned whether Beats, valued at just $1 billion during its last funding round in September, was worth that price.

Apple had more than $130 billion in cash as of the end of March, but the vast majority of that is parked abroad and investors have called on the company to return more cash in the form of dividends and buybacks.

Apple-watchers have speculated that the company that upended the music industry – and today is the single largest seller of tunes – was contemplating a Spotify-like on-demand music service to go with iRadio service and iTunes.

"This is really puzzling," said Forrester analyst James McQuivey, who said there was huge overlap between the two companies' customer base. "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," he said.

In two of the largest deals this year, Facebook paid $19 billion for WhatsApp and its half-billion users, and it paid $2 billion for Oculus VR and its cutting-edge virtual reality headset.

Apple declined to comment on the report. Beats Electronics did

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