Sunday, July 22, 2012

Beats Audio Buys Back Controlling Interest From HTC

It's been a crazy busy year for the headphone giant. In the past year alone, Beats by Dre has split ties with Monster Audio, opened its first flagship store in NYC and sold 51% controlling equity stake to HTC for $300 Million. Today, Beats by Dre has just announced that it has repurchased 26%  of the equity from HTC for $150 million.  When the $300 Million acquisition was made last year, there were many who thought the purchase price was ludicrous. These people were skeptical of how HTC would recoup it's money and how they would integrate a headphone company into their line of smart phones and tablets.

In September 2011, we saw the first collaboration between the two companies with the Beats Audio incorporated HTC Sensation XE. At first, the plan was to include Beats earbuds with the HTC smart phones. However, HTC quickly ended this approach as they decided to stop bundling the headphones and make it a paid option. Although the Beats technology was supposed to improve the quality of the playback, consumers haven't seemed to care. With the combination of HTC's recent slow phone sales and eroding profits, something needed to be done.

Beats Audio has agreed to buy back 26% of HTC's shares for $150 Million. Amazingly, HTC only expects to lose around $4.8 Million. It seems to me like HTC is getting off the hook easy for it's risky purchase. With 25% of Beats shares, HTC will remain the largest outside shareholder and will also have the exclusive rights to use Beats' technology in its phones.

Now that Beats Audio executives are back to having a controlling stake, I'm curious to see what approach they take in the next few months. I expect them to focus more on global sales and less on their partnership with HTC. However, with the kind of year that Beats Audio has had, nothing would surprise me.

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