Skip to main content

Apple to get musical with $3.2bn Beats acquisition

Apple is about to snap up Beats Electronics in a surprise acquisition which will reportedly cost Cupertino around $3.2 billion (£1.9 billion).

Beats, which was co-founded by Dr Dre and has become famous for its audio products such as headphones, and a music streaming service more recently (not to mention contributing on the audio front to past HTC phones), is expected to be swallowed up by Apple in short order.

According to the FT, talks are in advanced stages, and a deal could be inked as early as next week. At the same time, the FT's sources did caution that there were still sticking points in the negotiations which could potentially see the deal crumbling yet.

The move is surprising not just because Beats isn't the first company you'd automatically link with Apple, but simply due to the fact that Cupertino doesn't make billion dollar acquisitions. Firms which are snapped up by the Apple machine generally go for hundreds of millions, not billions. Not that Apple is short of the cash to leverage big acquisitions, mind.

So this would seem to be a sign that something big is in the offing. Apple already has iTunes, but has previously been rumoured to be looking to start its own Spotify-rivalling streaming service. The Beats streaming service (freshly launched this year) would provide this straight off the bat, and further bolster Apple's music offerings, perhaps also bringing some more cool and credibility to the brand. The same is true of Beats headphones – Apple may well be looking for something a bit funkier than its own earpods.

That's all well and good, but industry analysts are certainly doing some head scratching at the price Apple is paying for Beats, given that a round of funding last autumn only put the value of the company at over $1 billion (£600 million).

So that's a hefty premium Cupertino is willing to pay for gains which aren't exactly clear at this stage, leading some to speculate that there's hidden value to Beats for Apple which we're not seeing at this point.

Then again, dubiously costly major acquisitions are very much back in fashion this year, so maybe Apple is just keeping up with the Joneses...