Apple may buy Dr Dre's Beats for $3.2bn
09 May 2014, 12:36
San Francisco - Apple is close to paying a record $3.2bn 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 the media on condition of anonymity because the discussions were private.
A second source familiar with the matter said 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 start-ups such as Pandora.
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, Sennheiser Electronic 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 $1bn during its last funding round in September, was worth that price.
Apple had more than $130bn 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.
Apple declined to comment on the report. Beats Electronics did not respond to requests for comment on the news, which was reported first by the Financial Times.