Published on 9 May 2014 Sections ,

Record deal ahead? Apple in talks to buy Dr Dre’s Beats

Apple is reportedly close to paying a record $3.2bn for Dr Dre’s company Beats Electronics, which makes trendy headphones and runs a music streaming service.

The foray into music streaming and accessories would be quite a departure for Apple, which has not made a billion-dollar acquisition for years and which usually designs its products in-house.

Both companies are still hashing out details, but several sources involved in the negotiations told Reuters and other media outlets, on condition of anonymity. The rumours follow Apple chief Tom Cook’s comments last week that the company was “on the prowl” for new acquisitions. It appears that Beats Electronics fits the bill.

Founded by rapper Dr Dre and legendary music producer Jimmy Iovine, Beats Electronics is best known for its headphones line “Beats by Dr Dre”.

iBeats ahead?

But analysts and sources close to the negotiations say that the company’s new streaming service, and its 200,000 subscribers, is what caught the eye of Apple execs.

This is really puzzling. Forrester analyst James McQuivey

The move to buy Beats Electronics could signal Apple’s intention to create an on-demand service, combining iRadio, iTunes and the current Beats Music, allowing Apple to once again to break new ground in the music listening industry.

Beats was valued at just $1bn during its last funding round in September. 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.

“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 (has), or customers that no one has.”

“They must have something hidden under the hood,” he added.

Rotten Apple?

Apple has not made a billion-dollar acquisition in at least a decade, prefering to develop and design its products in-house. Instead, it has tended to pay several hundred million dollars for small but crucial bits of technology to propel its core consumer electronics business: one example is the acquisition of PA Semi in 2008 that led to the processor now found in all iPhones.

But company has been under pressure to try to revitalise growth as iPhone sales slow in a rapidly maturing market. Critics have also accused the company of slowly losing its cool and innovative edge to new and upcoming technology companies, and missing the music-streaming bandwagon.

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.

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