Apple’s Rumored Beats Deal Gets No Love From the Street
Apple’s (NASDAQ:AAPL) rumored bid for premium headphones maker Beats Electronics has Apple bulls and bears alike scratching their collective heads today. The story was first reported by the Financial Times on Thursday night after the markets closed and was affirmed by other media outlets on Friday. According to unnamed sources cited by the Financial Times, Apple is close to finalizing a deal that would allow it to acquire Beats for $3.2 billion. The rumor appeared to be confirmed when a video of Beats co-founder Dr. Dre seemingly celebrating the deal emerged on social media, reports 9to5Mac.
However, the Street was in a decidedly less celebratory mood over the news of Apple’s potential acquisition. Piper Jaffray analyst Gene Munster, who remains bullish on Apple with an “Overweight” rating, called the deal “a bad idea” in a research note released to investors today. “We are struggling to see the rationale behind this move,” wrote Munster in a note obtained by Barron’s. “Beats would of course bring a world class brand in music to Apple, but Apple already has a world class brand and has never acquired a brand for a brand’s sake (i.e., there are no non-Apple sub-brands under the company umbrella). Separately, we are not aware of any intellectual property within Beats that would drive the acquisition justification beyond the brand.”
On the other hand, Munster thought that the Beats co-founder Jimmy Iovine would likely be a boon for Apple’s overall content strategy. However, the Piper Jaffray analyst also noted that “$3.2 billion is a steep price to bring on one high-level executive.”