Apple close to buying Beats for $3.2 billion - source

Friday 09 May 2014 19.02
Apple set to make an expensive foray into music streaming and headphone gear
Apple set to make an expensive foray into music streaming and headphone gear

Apple is close to paying a record $3.2 billion for Beats Electronics, an expensive foray into music streaming and headphone gear that would mark a departure for the usually cash-conservative iPhone maker.

Both companies are working out details and the envisioned deal could still fall through, one person told Reuters on condition of anonymity because the discussions were private.

A second source familiar with the matter told Reuters that Apple was in the market for a subscription-based music service to complement its "iRadio" ad-based offering.

This was launched in 2013 as part of an attempt to jump into a music-streaming arena then split between a handful of startups such as Pandora. 

Founded by rapper Dr Dre and music producer Jimmy Iovine, Beats Electronics is best known for its "Beats by Dr Dre" line of trendy headphones that vie with the likes of Skullcandy, Sennheiser and Bose. 

This year, it launched a music service that has won plaudits for its slick design and human music curation, versus the computer-algorithms that determine playlists for most of its rivals.

But analysts questioned whether Beats, valued at just $1 billion during its last funding round in September, was worth that price. 

Apple had more than $130 billion 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.

Apple-watchers have speculated that the company that upended the music industry - and today is the single largest seller of tunes - was contemplating a Spotify-like on-demand music service to go with iRadio service and iTunes.

In two of the largest deals this year, Facebook paid $19 billion for WhatsApp and its half-billion users, and it paid $2 billion for Oculus VR and its cutting-edge virtual reality headset.

Apple has not made a billion-dollar acquisition in at least a decade. The company prefers to develop and design its products in-house, though it has tended to pay several hundred million dollars for small but important bits of technology to propel its core consumer electronics business, such as the acquisition of PA Semi in 2008 that led to the processor now found in all iPhones.

The 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.

Technology giants Google and Amazon began jockeying for position in music last year, looking at ways to make streaming profitable and to develop a service seen as crucial to retaining users in an increasingly mobile environment. 

For Google and Apple especially, the endeavor was critical to ensure users remain loyal to their mobile products.

They realised they had to stake out a place or risk ceding control of one of the largest components of mobile device usage. Analysts estimate roughly half of smartphone users listen to music on their device, making it the fourth most popular media-related activity after social networking, games and news.

Apple launched its own streaming music service last year, hoping to jump into the fast-expanding arena as growth of its iTunes service falters.

Apple's chief executive Tim Cooks met with Iovine, the Beats CEO, last year on a potential partnership involving Beats's planned music-streaming service, Reuters reported in March, citing sources. 

Apple plans early launch for iPhone 6 - report

Apple plans to release its new iPhone in August, a month earlier than expected, after sales were hit by new big-screen models from its rivals, a major Taiwanese newspaper reported today, citing supply chain sources.

The Economic Daily News quoted unnamed sources as saying Apple had acquired parts from various Taiwanese suppliers such as wafer maker Visual Photonics Epitaxy and Largan Precision, a leading maker of lenses used in mobile phones, for the handset expected to be called iPhone 6.

Taiwanese electronics contract makers including Foxconn and Pegatron have also been notified by Apple to start their assembly lines for the new handsets likely around late June, the newspaper said. 

Apple has decided to roll out the 4.7-inch screen version of the new model in August, a month early, as recent sales have been affected by the launch of bigger-screen phones from rivals such as South Korean giant Samsung and Taiwan's HTC, the report said.

A high-end variant of the iPhone 6 with a 5.5 or 5.6-inch screen will still be unveiled in September as previously planned, it said, adding that Apple expected total sales of 80 million units for both versions. 

Japan's Nikkei business daily reported in March that Apple would release its next iPhone in September, its latest salvo in the smartphone wars where it has lost global market share to rivals such as Samsung. 

Apple released its current iPhone 5 in September 2012 and newer versions in the series last year.

A number of top Taiwanese electronics companies have been behind the production of the iPhone series by supplying components or assembling the handsets. 

The latest to come onboard is the world's biggest contract chip maker Taiwan Semiconductor Manufacturing Co (TSMC), which reportedly started producing chips for the next iPhone in February. 

That news fed rumours that Apple is reducing its reliance for parts on Samsung, its main competitor in the mobile phone market and a bitter rival with which it is contesting several copyright court battles globally.