Dr. Dre and Jimmy Iovine: Apple’s Newest Executives?

Source: Thinkstock

Source: Thinkstock

Beats Electronics co-founders Jimmy Iovine and Andre Young — also known as Dr. Dre — could become Apple’s (NASDAQ:AAPL) newest executives if the rumored acquisition deal is completed, according to “people familiar with the matter” cited by The Wall Street Journal. Although the rumor that Iovine might join Apple as a “special advisor” to Tim Cook on creative matters was reported by the New York Post soon after the Financial Times broke the original Beats acquisition story on Thursday night, The Wall Street Journal’s sources are the first to suggest that Dr. Dre may also be taking a senior position at Apple.

If Apple’s purchase of Beats is completed, Iovine will leave his position as chairman of Interscope Geffen A&M records, according to the insider source. As noted by The Wall Street Journal, Interscope Geffen A&M records is a division of Vivendi SA’s Universal Music Group. Universal Music Group would likely approve the move since it is expected to collect $500 million in profit from Apple’s acquisition due to its 14 percent stake in Beats.

Although Iovine and Dr. Dre will work for Apple, it may not be in a full-time capacity. According to The Wall Street Journal’s sources, both men will likely commute to meetings at Apple’s Cupertino headquarters from Los Angeles only “as needed.” However, most details about the Beats co-founders’ potential duties at Apple are unknown.

Apple’s rumored bid for Beats Electronics was first reported by the Financial Times on Thursday after the markets closed. The $3.2 billion deal surprised many analysts and pundits who noted that this would be Apple’s biggest acquisition in its history. The most Apple has ever paid for a company was in 1997 when it acquired Steve Jobs’s NeXT for $400 million. As noted on the BeatsByDre website, Beats Electronics was formally established by Dr. Dre and Jimmy Iovine in 2008. According to IDC data cited by Bloomberg, Beats holds around a 65 percent share of the headphone market. The company also launched Beats Music — a subscription music-streaming service — in January of this year.

Analysts’ reactions to the rumored acquisition ranged from puzzlement to cautious optimism. Piper Jaffray analyst Gene Munster, whose first reaction to the potential acquisition was to call it “a bad idea,” later supplemented his original research note when the news of Iovine’s hiring emerged, reports Barron’s.

“Apple’s motivation to acquire Beats for $3.2 billion (still unconfirmed) appears to be to bring Jimmy Iovine, a founder of Beats (and rumored to own 25% of the company) and long time record and film producer, to lead Apple’s content strategy,” wrote Munster in a note obtained by Barron’s. “While gaining Iovine is a justification for acquiring Beats, we believe that $3.2 billion is a steep price to bring on one high-level executive, given our stance that Beats doesn’t appear to offer anything to Apple aside from a brand — which is not a weakness of Apple’s.”

Like Munster, Wells Fargo analyst Maynard Um also found Iovine to be one of the few upsides in Apple’s potential acquisition of Beats. “Iovine would bring music industry contacts and design team could help with Internet of Things,” wrote Um in a note released on Friday. “But we believe the valuation for this reason is high.”

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