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Apple is Bananas about Beats

headphones

In a move being hailed as “Really puzzling,” innovative tech powerhouse Apple Inc., is said to be acquiring the headphone company, Beats. James McQuivey, an analyst at Forrester Research said, “You buy companies today to get technologies or customers that no one else has.” The two firms, however, have significant overlap. Beats makes headphone hardware; Apple makes headphone hardware. Beats has a streaming music service; Apple has a streaming music service. Many wonder what Apple is really buying, especially given that they’re reportedly offering $3.2 billion for Beats, a company valued at only $1 billion just this past September…

One possibility is Beats’ branding. The founders of Beats, rapper Dr. Dre and music industry executive Jimmy Iovine, have taken the headphone business by storm, practically creating the market for premium headphones—those with a price tag higher than $100. The key to their popularity has been the use of high-profile celebrity endorsements from the likes of Lady GaGa and LeBron James to make their headphones more about style than stereo. Apple’s brand, though powerful in itself, was hit hard first by the death of its mastermind, Steve Jobs, in 2011 and then by Samsung who took aim at the company with their 2013 advertising campaign, “The Next Big Thing.” Buying Beats may be a way for Apple to buy back a bit of cool but that reasoning doesn’t sit too well with some. “…It would cause you to evaluate whether Apple is still Apple,” said McQuivey. “They [Beats] must have something under the hood.”

So the tech and business worlds are left to hypothesize about the identity of that “something.” Some speculate that the alleged buyout is not about headphones or music or even brand—it might be about wearable electronics that people actually want to wear. Prior to the popularity of Beats, headphones had been getting progressively smaller to the point that they were practically invisible. Beats turned that trend on its ear by making large, garishly colored pieces that were impossible to miss. Google Glass, the minimalist internet eyepiece, has been widely panned as a fashion disaster. If Apple wanted to avoid making the same mistake, they would do well with the expertise of Beats.

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Whatever Apple’s justification, there are still plenty of detractors. Maynard Um, an analyst for Wells Fargo, said, “Given the changing landscape and our view that Apple will have to reinvent its business model…we believe Apple should be acquiring other assets to better position itself, particularly for $3.2 billion.”

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