Apple Rumored to Be Buying Beats Electronics

Source: Thinkstock

Source: Thinkstock

Apple (NASDAQ:AAPL) may soon acquire premium headphone maker and music-streaming service provider Beats Electronics for $3.2 billion, according to unnamed “people familiar with the negotiations” cited by the Financial Times. The sources noted that the deal could be concluded as early as next week, assuming that the two sides can agree on various details.

The acquisition of Beats would be Apple’s biggest company purchase in its history. The most Apple has ever paid for a company was in 1997 when it acquired NeXT for $400 million in a deal that also returned Steve Jobs to the company he helped to start.

Beats was founded by Interscope Geffen A&M chairman Jimmy Iovine and hip hop artist Dr. Dre in 2008. As noted by the Financial Times, the Carlyle Group valued Beats at over $1 billion when it made a $500 million investment in the company in September 2013. According to IDC data cited by Bloomberg, Beats holds an approximate 65 percent share of the headphone market.

So what does Apple gain from such a large purchase? Besides immediately acquiring a significant slice of the premium headphone market, Apple would also gain Beats Music — the recently launched subscription music-streaming service. Beats Music was unveiled in January and has since generated more than “690 years worth of listening hours to date” from its community of subscribers, according to Beats Music’s official blog. Beats Music differentiates its service from other music-streaming services with its “expert-curated playlists” and a music selection feature known as “The Sentence,” which allows Beats mobile app users to receive a playlist based on a sentence describing how they are feeling or where they are at.

Meanwhile, Apple has been struggling to find its footing in a digital music industry that is increasingly shifting from downloads to streaming. According to Nielsen SoundScan data cited by Billboard, digital track sales in the first quarter of 2014 fell 12.5 percent compared to the year-ago quarter, while digital album sales went down 14.2 percent.

Although Apple launched iTunes Radio last September as a competitor to ad-supported services like Pandora (NYSE:P), the music-streaming service has failed to boost Apple’s declining digital music sales. According to unnamed label executives cited by Billboard, only 1 to 2 percent of iTunes Radio users opt to buy music through Apple’s music-streaming service.

In this sense, Apple’s bid for Beats may have more to do with acquiring the company’s music-streaming service, rather than its high-end headphones. Finally, besides a gaining a headphone maker and a growing music-streaming service, Apple will also be acquiring a brand that could boost its “cool factor.” Internal communications revealed in the recent patent-infringement trial between Apple and Samsung (SSNLF.PK) showed that the Cupertino-based company’s executives appeared to be increasingly concerned with the company’s cachet among younger consumers.

If you’re interested in Apple rumors, you might like one of our recent articles on Apple’s fingerprint sensor. Check it out below.

Apple’s Touch ID biometric authentication system will be implemented in the upcoming iPad Air 2 and iPad mini 3, as well as the next-generation iPhone, according to the latest rumor out of Asia. Apple supplier Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) began delivering the first batches of the fingerprint sensor assembly for all three devices in mid-April, according to “informed sources” cited by components trading network website cecb2b.com, via MacRumors.

According to the sources, Taiwan Semiconductor Manufacturing Co. has also outsourced some of the fingerprint sensor assembly production to Xintec and Suzhou Jing Fang, two other semiconductor manufacturers. The fingerprint sensors are reportedly being manufactured with the same 8-inch fab method that was previously used for the iPhone 5S, instead of a 12-inch fab method that a previous report from DigiTimes suggested would be used.

MacRumors reports that the implementation of the Touch ID technology in the next-generation iPad Air and iPad mini aligns with recent predictions made by well-connected KGI Securities analyst Ming-Chi Kuo. Last month, Kuo released a product roadmap that offered various details about Apple’s upcoming products.

“We think the upgraded iPad Air will be launched earlier in 2014 than the iPad Air was in 2013. The biggest changes will be A8 processor, Touch ID (fingerprint recognition), and main camera resolution of 8MP,” wrote Kuo in a note obtained by MacRumors. “We previously thought Apple would not release a new version of the iPad mini this year, but we now think Apple will launch an upgraded version with same form factor, A8 processor and Touch ID (fingerprint recognition) to boost shipments of iPad mini with Retina display.”

Last year, Apple released the iPad Air on November 1, while the iPad mini with Retina display hit store shelves on November 12. Industry sources cited by Korea’s ETNews claimed that the iPad mini with Retina display launch was delayed due to yield issues related to production of the high-resolution display. Similarly, Jefferies analyst Peter Misek blamed the initial iPhone 5S shortages on “terrible” yields for the fingerprint sensor assembly, reports StreetInsider. Taiwan Semiconductor Manufacturing Co.’s relatively early start on the manufacturing of the fingerprint sensor assemblies for this year’s crop of devices suggests that Apple is seeking to avoid a repeat of last year’s supply problems.

It should be noted that Apple isn’t the only tech company gearing up to release a tablet with a fingerprint sensor this year. According to a new report from SamMobile, Samsung’s upcoming Galaxy Tab S will also feature a fingerprint sensor. Samsung’s tablet will use the same fingerprint sensor technology that the Korea-based company used in its recently released Galaxy S5 smartphone.

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