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Apple is close to inking a record $3.2 billion deal for Beats Electronics that would mark the company’s foray into music streaming and headphone gear.
that would mark a departure for the usually cash-conservative iPhone maker.
Both companies are hashing out details and the envisioned deal could still fall through, said a source close to the officials of both the companies.
A second source revealed that Apple was in the market for a subscription-based music service to complement its “iRadio” ad-based offering, 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.
Beats Electronics is best known for its “Beats by Dr Dre” line of trendy headphones that vie with the likes of Skullcandy, Sennheiser Electronic and Bose. This year, it launched a music service that has won praises for its slick design and human music curation, versus the computer-algorithms that determine playlists for most of its rivals.
But analysts has raised question on the deal. They argue, Beats which was 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.
This would be the third largest deal followed by Google which paid $19 billion for WhatsApp and its half-billion users, while Facebook paid $2 billion for Oculus VR and its cutting-edge virtual reality headset.
Beats Electronics received a $500 million investment from Carlyle Group in September that valued the company at over $1 billion. It also bought back in September a 24.84% stake held by Taiwan smartphone maker HTC, which once held as much as 50.1% of the company.