Apple To Buy Headphone Specialists Beats For £1.9bn?

Apple is reportedly in talks to purchase premium headphone manufacturer Beats Electronics for $3.2 billion (£1.9bn) as the Cupertino-based company seeks to improve its street cred ahead of a possible iWatch launch.

According to The Financial Times, Apple would gain control of Beats’ audio equipment and music streaming businesses and that the deal could be confirmed as early as next week, although some details are still being ironed out and negotiations could still fail. Under the terms of the proposed deal, the Beats team would report directly to Apple CEO Tim Cook.

Ironically, Beats was founded by music producer Jimmy Iovine and hip-hop artist Dr Dre because of the poor quality of the headphones bundled with Apple products. Struggling HTC once held a 25 percent stake in Beats, but sold it late last year. Beats technology is also used in other products, including some HP PCs and even some Chrysler, Dodge and Fiat cars.

Apple Beats

Any deal of this size would mark a significant change in Apple’s acquisition strategy and is being interpreted by some as an admission by the company that it needs to look beyond Cupertino if it is to continue to innovate in the music industry.

This could help explain why Apple is prepared to pay such a premium for a company that was valued at $1 billion as recently as September.

The launch of the iPod and iTunes transformed the music industry and although the latter is still the world’s largest online music store, downloads are decreasing as consumers switch to online streaming services such as Spotify. Apple has already launched iTunes Radio, but it would gain access to Beats’ own service with the acquisition.

However another theory is that Apple fears the iPod and iPhone brands are not as “cool” as they once were. Apple’s trademark white headphones once a status symbol, but Beats’ red headphone cables have now surpassed them in terms of desirability.

Apple is widely believed to be working on a smartwatch dubbed the iWatch and gaining access to Beats’ headphone and fashion expertise could give it an edge in wearable technology. One of the reasons that Burberry CEO Andrea Ahrendts has been recruited by Apple to run its retail stores is because of her experience in the fashion industry.

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