Bloomberg reports that Apple (AAPL) is in advanced talks to acquire Beats Electronics, saying that the deal could be finalized as soon as next week. According to the report, Cupertino is offering a record $3.2 billion for the high-end-headphone maker and music streaming operator, a company co-founded in 2008 by hip-hop artist Dr. Dre and music mogul Jimmy Iovine.
The potential acquisition, which is expected to give Cupertino a stronger foothold in the music-accessories business as well as boost its online music capabilities, would be the biggest in Apple’s 38-year history if it closes.
Beats Electronics, considered one of the sexiest startups in the premium-music space, received $500 million investment from Carlyle Group during its last funding round in September, valuing the company at more than $1 billion. But some Apple observers on Thursday were skeptical about the deal, saying the potential merger on some levels makes little sense.
John Jackson, an analyst with IDC in Boston, told Mercurynews that reports of a deal seem “counterintuitive” on multiple fronts.
“It is well understood that there are boatloads and boatloads of margin in accessories,” Jackson said. “But the Beats and Dr. Dre seem like two highly incongruous brands and there is no obvious alignment between Beats and how it would be positioned relative to the Apple line.”
Said Jackson: “It doesn’t seem like a logical marriage.”
It has been reported that Apple is contemplating a Spotify-like on-demand music service to go with iRadio service and iTunes.
“This is really puzzling,” Forrester’s James McQuivey told Reuters, noting that there was huge overlap between the two companies’ customer base. “You buy companies today to get technologies that no one else … or customers that no one has.”
“They must have something hidden … under the hood,” he said.
If the deal goes through, it will make Andre Young, better known as Dr. Dre, the richest man in hip-hop, according to Forbes.
Apple and Beats have yet to commented on the news, which was reported first by the Financial Times.