Dr Dre’s Beats ‘to buy out HTC’ from headphones company
Rapper Dr Dre and music producer Jimmy Iovine want to bring fresh investors into the business to grow a product beloved by footballers and celebrities.
It comes as HTC, Taiwan’s largest smartphone maker, grapples with falling sales amid a highly competitive market.
HTC bought a 50.1pc stake in Beats in August 2011 for $300m (£192m), incorporating Beats’ audio system into its phones in a bid to strengthen its position in the US.
HTC was the top seller of Android-based smartphones in the US in 2010, with a market share of 11.8pc, but lost the top spot to Samsung just two years later.
However, the tie-up with Beats failed to arrest HTC’s decline and it sold half its stake back to Dr Dre and Mr Iovine last year at a $5m loss.
“I haven’t seen much synergy from the cooperation,” BNP Paribas analyst Laura Chen told the Wall Street Journal (WSJ). “Beats has an advanced audio system and design, but it turned out having that in HTC phones didn’t help sales in a meaningful way.”
Last month, HTC shares slumped to their lowest level in eight years after it predicted an eighth straight fall in quarterly sales. It sees revenues of NT$60bn (£1.3bn) in the three months to the end of September, well short of analyst expectations of NT$72.7bn. The company may also post a loss.
In contrast, Beats, whose headphones can sell for hundreds of pounds each, saw revenues jump to around $1bn last year from less than $200m in 2010, WSJ reported.
It currently holds 59pc of the US market for premium headphones, according to NPD Group.
Beats, which was set up in 2008, has recently attempted to raise funds to diversify the company. It is believed to be looking at branching out into speakers, car stereos and a music streaming service.
HTC said it has “enjoyed a solid business partnership” with Beats.
Beats did not respond to a request for comment.