Apple (News - Alert) is a company that’s always on the move. Recently, TMCnet reported it is the number two Internet retail seller—only trailing Amazon. Under Steve Jobs (News - Alert), Apple was never short on flair, innovation and creativity. He was the proverbial, “man behind the curtain,” the straw that stirred the drink if you will. Well, times have changed; it seems Tim Cook is looking down a different rainbow for his pot of gold, acquisitions. Apple appears on the verge of its twenty-fourth—and largest in its history—in just the past eighteen months.
Forbes confirmed earlier today that Apple is in negotiations to acquire Beats Electronics with a quote from the co-founder of Beats, Dr. Dre who said he was the, “First billionaire in hip-hop, right here on the mother-f$%&*#$ west coast,” in classic Dre style. The quote was taken from a video (Warning: There is profanity) on R&B singer Tyrese Gibson’s Facebook (News - Alert) page.
To be clear, Dre is not in line for the payday many expect. His share in Beats is between 20-25 percent, after taxes the deal should net him about $800 million topping hip-hop’s former richest man, P Diddy—who comes in at around $100 million.
Now that it is confirmed that Apple is in negotiations to purchase Beats Electronics for $3.2 billion, an announcement is expected sometime next week as both sides are still negotiating details. The move is an interesting one for Apple; its “typical” acquisitions are IP and unseen.
Beats Electronics makes a slew of multicolored high-end headphones, speakers, ear buds and other listening devices. It also offers a Beats Music, designed by music people, for people.
TMC CEO Rich Tehrani (News - Alert) refers to Beats as, “Bose for the under-40 generation,” which it is, and will be a new generation of revenue for Apple. For starters; it sold around $1 billion in headphones in 2013. The headphones are trendy, hip and represent an opportunity for Apple to cut out another middleman.
Is it that Apple wants Beats’ subscriber base? Frankly, I could not tell you the last CD I bought; this growing trend is now the norm. Remember that Beats has a loyal subscriber base that can only grow over time and integrating Beats Music into iTunes can only benefit in the long run.
Another question to ask is, ‘What else was Apple to do with $150billion in the bank?’ Analysts and investor have been clamoring for a new iPhone (News - Alert), iPad, or dare I say iWatch. No, it’s not the same as developing in-house and building from the ground up, but it is something.
In six short years, Dr. Dre took the high-end consumer headphones market by storm and Apple is grabbing the baton and running. However, nobody seems to know where it is headed—Except Tim Cook.