Apple Inc. (AAPL) Close to Striking a Deal to Buy Beats Electronics

by Marie Cabural - May 8, 2014

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Apple Inc. (NASDAQ:AAPL) is close to striking a deal to purchase Beats Electronics, the headphone maker and music streaming service provider co-founded by music producer, Jimmy Iovine and rapper Dr. Dre.

The Cupertino-based giant proposed to purchase Beats Electronics for $3.2 billion, which would be its largest acquisition, according to Financial Times based on information obtained from sources knowledgeable about the situation.

The sources said Apple Inc. (NASDAQ:AAPL) and Beats Electronics are still negotiating on some details, and warned of a possibility that talks could still collapse. The source also suggested that the companies might be able to close the deal and announced it as early as next week.

Other tech companies such as Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB) recently made huge acquisitions. The search engine giant bought Nest Labs for $3.2 billion while the social network giant purchased WhatsApp for $19 billion.

Since the leadership of the late Steve Jobs, Apple Inc. (NASDAQ:AAPL) has been reluctant in making huge acquisitions. Such trend continued under the leadership of its current CEO Tim Cook. Last February, Cook emphasized that Apple has no problem spending a huge amount of money on acquisition. Cook said it should be the right company that is beneficial for Apple over the long term. According to him, the iPhone and iPad maker acquired 24 smaller companies over the past 18 months.

“We’re not going to go out and buy something for the purposes of just being big. Something that makes more fantastic products, something that’s very strategic – all these things are of interest and we’re always looking regardless of size,” said Cook.

Given the proposed acquisition price for Beats Electronics, it only shows that Apple Inc (NASDAQ:AAPL) found the right company to continue to develop innovative products that has huge impact to consumers. Take note the Jobs transformed the music industry by introducing the iPod digital music store and iTunes download music store.

Observers in the technology industry opined that the Cupertino-based company is paying a large premium for Beats Electronics as it aims to get a strong position in the music-accessories business and improve its online music capabilities. The Beats headphones are very popular. Beats Electronics launched Beats Music, a music-subscription service that competes with online radio service providers such as Pandora Media Inc (NYSE:P) and Spotify.

Cook together with Eddy Cue, the internet products chief and a key player behind iTunes Music Store meet with Iovine in March regarding a potential partnership on Beats Music streaming service. At the time, Apple Inc (NASDAQ:AAPL) also wanted to learn about Beat’s music subscription service dubbed as “Project Daisy.”

The Curpertino-based tech giant has an existing partnership with the audio technology company as it is selling Beats earphones at Apple Stores.

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