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Apple is in discussion to buy Beats Electronics, according to sources briefed on the talks. Beats Electronics, the company that provides the fast growing, Beats by Dre headphones, is in talks with Apple for an acquisition of $3.2 billion. It would be the biggest in Apple’s history.
In the deal, the new Beats Music streaming service will be included. That could lead to Apple transforming it’s method to music, after opening it’s iTunes download store more than ten years ago.
The deal hasn’t been sealed, and negotiations could yet crumble, according to sources close to Apple. If completed, the sale could be announced as early as next week. Apple and Beats declined to comment.
Over the past few years, Apple’s revenue has declined, but the deal could put the company, which only last year released it’s streaming product, iTunes Radio, on the forefront of streaming music.
The purchase of Beats would put Apple on top of it’s game, plus the product and brand was founded by the rapper Dr. Dre and music executive Jimmy Iovine. Apple has been under pressure from investors to release new products after the iPhone and iPad success, but no new products have yet to be released.
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The $3 billion deal would be the biggest for Apple. It’s co-founder Steven P. Jobs, preferred smaller deals, but before his death, Timothy D. Cook took over as chief executive of the company, and since then Apple has attained 24 companies in the last 18 months.
“We are expanding Apple’s products and services into new categories, and we are not going to under-invest in this business,” Mr. Cook said in the earnings call.
In 2008, Beats began to sell it’s bass-heavy headphones. They quickly became a fashion statement as some fetch as much as $450 each. Annual sales of Beats products have been estimated at more than $1.5 billion. A private equity firm, Carlyle Group invested $500 million in the company, making Beats valued at more than $1 Billion.
Ben Bajarin, a consumer technology analyst for Creative Strategies, said that a purchase of Beats would not be a big departure from Apple’s strategy of buying companies for their technology and talent to help develop future products. In other words, it is unlikely Apple would just ship Beats headphones with an Apple logo on them.
“This would have to fit into a much longer, more innovative strategy around perhaps the hardware and the service,” Mr. Bajarin said.
According to earlier reports from The Financial Times, the Beats deal suggests that Apple may want to shake up its approach to digital music. Apple is still the biggest seller of downloads, operating in more than 100 countries around the world.
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Image credit: watchloud.com
