Beats acquisition by Apple will define Tim’s Cook reign
The tech industry is abuzz with news of $3.2 billion Apple’s acquisition of Dr. Dre’s Beats. Interestingly many analysts and columnists believe that the deal is not worth it completely goes against Apple’s approach and strategies. I beg to differ with these opinions, and in this piece I’ll clarify why this deal could go down in the company history as one of a kind.
What is Good about Apple Acquisition of Beats
Many technology columnists and analysts have chosen to ignore what Apple (AAPL) stands to gain if the ‘Beats by Dre’ deal goes through. Should they have considered a few factors, perhaps they could have seen this deal in another way.
Here is why I can’t wait to see ‘Beats by Dre’ become ‘Beats by Apple’:
- ROI on Beats comes quickly and Apple can monetize it better
Beats annual revenue from headphones alone stands at about $1 billion. Apple sells these high-end headphones in its stores. The music streaming services is an additional service, which comes with subscription and brings its own revenues. Apple can utilize these businesses better and perhaps lead the company to a double digit revenue growth. It would only take 3 or 4 years for Apple to get returns on its investment.
- Beats Headphones could be Paired with yet to be Unveiled iWatch
Apple is yet to launch their iWatch, and this acquisition could lead to another innovation where the iWatch is paired with the headphones. The beats headphones are really great and people who hate Apple’s ear buds could use Beat’s instead.
- Revamp its Music business
Acquisition of beats could help Apple revamp its music business, iTunes, which after a decade of success is now under threat, though minimal, from players like Spotify, Rdio and Pandora.iTunes’ growth has reached its peak and requires to be titivated a little to restore sales growth, which reversed in 2013.
- Beats Headphones can be used with Android products
Unless Apple changes it, Beats high-end headphones can be used by Android users as well. Perhaps this could help Apple penetrate the massive Android market.
Beats is a renowned high-end headphone maker and music streaming services provider co-founded in 2008 by rapper & businessman Dr. Dre and music producer Jimmy Iovine. The company has a market worth $1 billion and is still expected to grow. Its shareholders include Dr. Dre, Jimmy Iovine and billionaires Marc Rowan, James Packer, Len Blavatnik, and Lee Bass. The company, widely believed to be worth $2 billion, was rumoured to be arranging for an IPO after hiring chief financial officer An De Vooght. However, the news of Apple deal seems to have killed that possibility.
The biggest acquisition Apple has ever made is NeXT back in 1996 at a price of $404 million. This deal is still widely considered as one of the best deal the company ever made, as it brought back Steve Jobs who was callously removed from Apple, which he co-founded. Since then the company has often stayed away from big acquisitions. So Beats deal has come has a surprise to many. This acquisition marks the first major move spearheaded by Jobs’ successor, Tim Cook. The move could also mean that the iPhone maker’s new man at the helm has started pulling the strings. This acquisition might go along way to define Cook’s reign at Apple.