NEW YORK (TheStreet) -- The Beats Audio deal would give Apple (AAPL) a significant advantage in the consumer electronics space. Beats Audio has become the de-facto brand of major music artists from Jay Z, Armin Van Buren, Pit Bull, and Avicii, which may be the only reason Tim Cook wants to buy the company.
Put another way: What's the difference between an iPhone, and a Samsung Galaxy S 5 (SSNLF)? Simple, one has Apple's signature logo,and the other doesn't. Sure, we could debate technological specs, to the day earth goes cold but realistically, what makes an Apple device better than a Samsung Galaxy?
Not a whole lot.
Even so, Apple charges a pretty premium for its products. How the heck do they get to do that? Hmm... good question let me put it this way. Usually, when I ask out a girl, I have to get their phone number. With an iPhone, I feel way more confident. But with my Samsung, I get thrown in with the "not-so-cool-people."
So, which phones make you feel more confident? *cough* iPhone.
Hell, even Bill Gates said he envied Steve Job's taste.
Some are frugal, and yeah that good old cliche "a penny saved is a penny earned." But kids these days just don't give a damn -- they'll pay top dollar just to look "good."
Which brings us back to Beats Audi. Apple appear to be keen on buying Beats to make sure the iPhone remains the coolest mobile phone on the market. Welcome to the world of licensing.
A Beats Audio deal also looks to be accretive, immediately adding to profits. But is Apple buying a really good headphone manufacturer? No, Apple wants the brand, and couldn't care less about the technology. In fact, I'm sure Apple could come up with a much better -speaker technology but it doesn't have the branding in place to attract consumers.
Beats Audio is the brand that many in the younger generationembrace. Their favorite artists, and their closest friends, all want a Beats Audio headphone over Sony (SNE), Apple, Bose or other recent entrants.
Fact is, for $3.2 billion, Apple can win back some serious mojo.
You see, for a while, Samsung took an iPhone, and put it next to the Samsung Galaxy S4. The advert would say something along the lines of, "hey look at that small screen, but look at this big screen. Come play with the big boys." No, that's not exactly how they worded it, but I hope you catch the drift.
However, in retaliation Apple has the ammunition to come with an ad that goes like this: "Hey folks our iPhone comes with Beats Audio! But Samsung, nope they don't have Beats Audio! Look at our sleek new screen, it's covered in sapphire. But what about Samsung? Nope Samsung has a standard screen. Look at the metallic cover of the iPhone, mhm it's beautiful. But oh wait, Samsung uses a plastic cover - bummer. You see - people actually stand in line for the stuff we sell (camera footage from the long line at the Manhattan Apple store). But hey here's the launch of the Samsung Galaxy S5 (video of a non-existent line in front of Best Buy)."
Soon Apple can sell everything with Beats Audio, without having to pay hefty licensing fees. Front-end costs, will be offset with back-end cost savings, and may result in market share gains across tablets and smartphones. If Apple gains 2% market share against Samsung, that alone would cover the cost of a $3.2 billion acquisition.
Overall, you should be a fan of Apple's big-boy acquisition. At least the cash isn't sitting around in a vault of T-Bills that pays below average returns.
Plus if iPhone 6 comes with Beats Audio the kids will go wild. Rumors indicate that the iPhone 6 will come with a big screen. So the old people, don't have to squint anymore.
This is just textbook savvy business. We don't have a visionary CEO at Apple, but at least he isn't stupid.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.