This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Apple Looks to Regain Rhythm in Music Business

Stocks in this article: AAPL P UBS

NEW YORK (The Deal) -- Apple (AAPL - Get Report)'s long-rumored acquisition of Dr. Dre's Beats Electronics and its Beats Music subsidiary is official. The $3 billion purchase, announced after the bell on Wednesday, includes the headphones and nascent music streaming service.

The transaction provides Apple CEO Tim Cook flashy products to show off at the company's annual Worldwide Developers Conference in San Francisco next week.


WATCH: More tech videos on TheStreet TV | More videos from Debra Borchardt

Apple is acquiring a line of trendy accessories for iPhones, but UBS  (UBS) analyst Steven Milunovich suggested that Beats' streaming music service is the main attraction. "Apple touts Beats as best in class with a combination of algorithmic and human curation that is the future," Milunovich wrote in a Thursday note, suggesting that the deal is a defensive move to counteract weak downloads of songs through iTunes.

"Catching up to Spotify and Pandora Media (P - Get Report) is a tall order," Milunovich wrote. "Apple may have concluded that it needed a separate brand and approach."

Macquarie Capital analyst Ben Schachter called Beats an "un-Apple-like acquisition" in a research note.

"We understand that music is important to Apple's DNA/culture but we believe that $3 billion could have been better spent on directly acquiring exclusive rights to key music libraries while also hiring key talent," Schachter wrote. The analyst suggested that Apple could have targeted a range of content "including games, video, sports rights, productivity apps, healthcare apps or any number of other key verticals that could help drive the ecosystem."

Apple will also gain a high-powered music industry dealmaker, as Beats co-founder and Interscope Geffen A&M Records chairman Jimmy Iovine will join the company.

Apple did not say whether the payment is in cash, stock or a mix. It did say the initial purchase price is $2.6 billion with the remaining $400 million slated to vest over time. UBS projects that the price comes to two times 2014 sales.

The price was previously rumored to be $3.2 billion in early May. The deal was slow to materialize, though there were public signals that a transaction was in the works. Dr. Dre boasted in a video posted online that he would be the first hip-hop billionaire earlier in the month.

Kyle Krpata of Weil Gotshal & Manges led a team advising Apple. Kevin Masuda headed a Munger, Tolles & Olson team advising Beats Electronics, while Beats Music received counsel from a team from Munger, Tolles led by Brett Rodda.

Jimmy Iovine and Dr. Dre retained Skadden, Arps, Slate, Meagher & Flom lawyers including Brian McCarthy.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,416.85 +225.48 1.31%
S&P 500 2,021.25 +19.09 0.95%
NASDAQ 4,683.4070 +45.4130 0.98%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs