NEW YORK (The Deal) -- Apple (AAPL)'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.
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) 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."