Apple's rumored Beats buyout baffles pundits & analysts alike
Since numerous publications have corroborated claims that Apple is apparently in talks to acquire headphone maker Beats Electronics for $3.2 billion, the rumored purchase has been largely met with scorn, confusion and even disbelief from tech industry watchers.
One of the first to weigh in was analyst Gene Munster of Piper Jaffray, who bluntly said he believes an Apple acquisition of Beats would be a "bad idea."
"We are struggling to see the rationale behind this move," Munster wrote in a note to investors provided to AppleInsider. "Beats would of course bring a world class brand in music to Apple, but Apple already has a world class brand and has never acquired a brand for a brand's sake (i.e., there are no non-Apple sub-brands under the company umbrella)."
He went on to note that Apple typically acquires companies for their technology, but he's not aware of any intellectual property within Beats that would be of interest to Apple.
Munster believes Apple would be better suited spending the cash on improving its presence in the Internet services space. He cited Yelp, Twitter, Square and even Yahoo as potential purchases that might make more sense for Apple.
Apple pundit John Gruber of Daring Fireball was similarly at a loss for explanation after the news broke, saying that neither the brand nor its hardware seem like a good fit for Apple. He noted that the only product Apple sells that isn't under its own brand is Filemaker, but that arrangement is "downright prehistoric."
"I can't see Apple keeping the 'Beats' brand around for headphones," Gruber wrote. "If Apple wanted to sell expensive high-end headphones, they don't need to spend $3 billion."
Some have speculated that the company's newly launched Beats Music streaming service might be the real target of Apple's acquisition. But Gruber was similarly unimpressed by that theory as well, saying that the licenses owned by Beats are likely non-transferable in the event of an acquisition.
Peter Kafka of Re/code weighed in on that same subject, and did affirm that the music rights signed by Beats won't transfer after a sale to Apple. As to whether music labels who have licensed deals with Beats would want to create new deals with Apple, Kafka said he's heard "split opinions."
Analyst Rod Hall of J.P. Morgan wasn't quite as negative as others on Friday, labeling the rumored deal with a "neutral" outlook in his own note to investors. Like many others, he doesn't think Apple is interested in Beats headphones, and may be interested in purchasing the company solely for its music streaming rights.
"Bigger picture, we calculate this has an immaterial impact to short term earnings and, with inflation likely in the next few years in our view, it's good to see Apple shedding cash to acquire possible new sources of revenue as long as acquisition doesn't become too large a drag on management," Hall wrote.
Reaction on Twitter and among commenters on AppleInsider and others sites has been decidedly negative, with Apple supporters expressing their hope that rumors of the deal turn out to be a red herring.
Rapper Dr. Dre, one of the owners of Beats Electronics, seemingly confirmed the deal late Thursday after singer-actor Tyrese posted a video of the two of them celebrating the "first billionaire in hip-hop." The Financial Times first broke word of the talks, and subsequent affirmations were provided by Bloomberg, The Wall Street Journal, The New York Times and other major publications.
The supposed deal is said to give Apple control of Beats' audio hardware division, as well as its subscription-based music streaming service. It's also rumored that Beats Chief Executive Jimmy Iovine may join Apple as a "special advisor" to Tim Cook.
One of the first to weigh in was analyst Gene Munster of Piper Jaffray, who bluntly said he believes an Apple acquisition of Beats would be a "bad idea."
"We are struggling to see the rationale behind this move," Munster wrote in a note to investors provided to AppleInsider. "Beats would of course bring a world class brand in music to Apple, but Apple already has a world class brand and has never acquired a brand for a brand's sake (i.e., there are no non-Apple sub-brands under the company umbrella)."
Is Apple's rumored Beats deal about streaming music rights? Headphones? Dr. Dre's secret stash? Or maybe it's bogus? Give us your take.
-- Tip AppleInsider (@TipAppleInsider) He went on to note that Apple typically acquires companies for their technology, but he's not aware of any intellectual property within Beats that would be of interest to Apple.
Munster believes Apple would be better suited spending the cash on improving its presence in the Internet services space. He cited Yelp, Twitter, Square and even Yahoo as potential purchases that might make more sense for Apple.
Apple pundit John Gruber of Daring Fireball was similarly at a loss for explanation after the news broke, saying that neither the brand nor its hardware seem like a good fit for Apple. He noted that the only product Apple sells that isn't under its own brand is Filemaker, but that arrangement is "downright prehistoric."
"I can't see Apple keeping the 'Beats' brand around for headphones," Gruber wrote. "If Apple wanted to sell expensive high-end headphones, they don't need to spend $3 billion."
What happens when the richest and most sophisticated technology company to ever exist on Earth starts spending its money? Stay tuned: $AAPL
-- Daniel Eran Dilger (@DanielEran) Some have speculated that the company's newly launched Beats Music streaming service might be the real target of Apple's acquisition. But Gruber was similarly unimpressed by that theory as well, saying that the licenses owned by Beats are likely non-transferable in the event of an acquisition.
Peter Kafka of Re/code weighed in on that same subject, and did affirm that the music rights signed by Beats won't transfer after a sale to Apple. As to whether music labels who have licensed deals with Beats would want to create new deals with Apple, Kafka said he's heard "split opinions."
Analyst Rod Hall of J.P. Morgan wasn't quite as negative as others on Friday, labeling the rumored deal with a "neutral" outlook in his own note to investors. Like many others, he doesn't think Apple is interested in Beats headphones, and may be interested in purchasing the company solely for its music streaming rights.
"Bigger picture, we calculate this has an immaterial impact to short term earnings and, with inflation likely in the next few years in our view, it's good to see Apple shedding cash to acquire possible new sources of revenue as long as acquisition doesn't become too large a drag on management," Hall wrote.
Reaction on Twitter and among commenters on AppleInsider and others sites has been decidedly negative, with Apple supporters expressing their hope that rumors of the deal turn out to be a red herring.
Breaking: Entire Twittersphere now an expert on the genius and/or idiocy of Apple buying Beats.
-- Ina Fried (@inafried) Rapper Dr. Dre, one of the owners of Beats Electronics, seemingly confirmed the deal late Thursday after singer-actor Tyrese posted a video of the two of them celebrating the "first billionaire in hip-hop." The Financial Times first broke word of the talks, and subsequent affirmations were provided by Bloomberg, The Wall Street Journal, The New York Times and other major publications.
The supposed deal is said to give Apple control of Beats' audio hardware division, as well as its subscription-based music streaming service. It's also rumored that Beats Chief Executive Jimmy Iovine may join Apple as a "special advisor" to Tim Cook.
Comments
When Bob Lefsetz rumored it back on April 1st I figured it was an April Fool's joke...maybe not?
First impression: worst deal by Tim Cook ever.
I don't really see the synergy between Apple and Beats. Apple is known for producing quality hardware and Beats has second rate headphones. If Apple is after their streaming music service, John Gruber claims the licenses aren't transferable. Maybe he is wrong. Beats is certainly being overvalued in this deal and is not worth $3 Billion.
I need to seriously consider unloading my positions in AAPL now.
Samsung spends $14B a year on advertising and marketing.
think about that and what the Beats line will do for Apple's image with urban youth
That's exactly it! You put the Beats logo on anything and kidz will do whatever it takes to get it.
If that represents the actual thinking at Apple, I would immediately unload all of my shares. That cannot possibly be the case.
Jimmy Iovine is a great business man. I believe he can sell ice cubes to eskimos which is likely the case here. "Hey Tim, why don't you hang out with us so you can be rich AND cool?". I believe this would be the worst buy for Apple ever. Spend a few more billion and buy Yahoo.
Samsung spends $14B a year on advertising and marketing.
think about that and what the Beats line will do for Apple's image with urban youth
Yeah because that's what Apple needs to be focused on. Most other tech companies are focused on the cloud, AI, Robots, etc. Apple is focusing on their street cred with the urban youth. Excuse me while I barf.
I wasn't sure about this potential deal until I read this.
Quote:
One of the first to [weigh] in was analyst Gene Munster of Piper Jaffray, who bluntly said he believes an Apple acquisition of Beats would be a "bad idea."
Now I know it must be a "good idea."
But Munster is an idiot no matter what he says.
$3B is just kind of a lot to spend on the gold-plated HDMI cables of the headphone world.
John Gruber doesn't know jack sheet. Same guy who said Samdung was going to destroy Apple 12 months ago.
Apple can easily pay for the deal in Stock. They have $45B of it lying around.
When did Gruber ever say that Samsung was going to destroy Apple?
You obviously have not done your research.
No one wears HDMI cables. It is NOT a fashion statement.
You probably said that Nike would never survive either when they started selling $120 shoes in the early 80's.
People PAY for style.
Ever heard of Louis Vutton bags? This is the equivelant for the male population.
I have not said that people don't buy the headphones. I'm saying that it seems Apple is paying too much for theirs. I'm sorry the Monster Cable association was over your head.
While I don't like this news because of the Apple stock I owe, it's not because I don't think it's a good idea... in fact, I think it's a GREAT idea. The reason I don't like it is now the stock is going to take a huge dip because of the idiot analysts and tech pundits that don't have a brain that investors evidently think know everything. This just gave them fuel for the "Apple is doomed" monologue in their talking head video spots. Of course Tim Cook sneezing the wrong way does that. So the stock will drop and when the buyback happens Apple will basically be acquiring Beats for free.
The reason why no one understands the logic is because they aren't Apple. They are looking at things through the lens of Apple being a tech company. Apple, starting many moons ago under Steve Jobs, is transition AWAY from technology. Sure that's what they do, but not who they are. That's why you don't see Apple touting huge spec sheets on their phones. They are not marketing the devices based on numbers, they are marketing them based on form, function and the pursuit of happiness.
Apple is becoming, or more accurately, self-actualizing as a fashion company.
Look at the new hires and look at the products coming down the pipe. It is more important for most people that they buy the hot fashionable item that fills the need that they have. Apple is now working with experience like Burberry, Nike and many others because they are the brand to beat.
This places measly cell phone companies or tech giants in a huge conundrum of not being "cool" and having no idea how to get there. You'll always have fashion knock-offs and you'll always have pedestrian brands... Apple's is showing through this acquisition that they are going for the king position in branding to today's youth and that, my friends, is a longer term strategy.
Dr. Dre has to be really thanking Jimmy Levine cause Dre wanted to create a Dre basketball shoe... creating headphones never crossed his mind. WTH?! (look it up if you don't believe it)
If Apple buys this crap it's a terrible shame.