Beats Electronics is reportedly looking to end its relationship with smartphone maker HTC. The producer of the popular high-end Beats by Dre headphones are interested in buying back HTC’s 25 percent stake in the company and moving on to more strategic relationships. According to theverge.com:
“The popular headphone maker Beats is reportedly attempting buy back HTC’s 25 percent stake in the company. The news comes from a Wall Street Journal report that cites ‘people familiar with the matter’ as claiming Beats is looking to bring in a new investor to provide ‘fresh funds for growth,’ and plans on buying back HTC’s stake at the same time.”
The Beats and HTC relationship began a few years ago when HTC bought a majority stake in the company. According to The Wall Street Journal:
“Two years ago, Mr. Iovine and Dr. Dre sold a 50.1% stake in Beats Electronics to HTC for around $300 million, to only a year later buy half of that back for around $150 million—a discount given Beats’ substantial growth in the intervening months.”
The speculation that Beats may be ending its relationship with HTC may not have come at an opportune time. Although HTC has rapidly declined from its place of prominence in the smartphone market, it just recently started a $1 billion marketing campaign with movie star Robert Downey Jr. to make the brand relevant again. As reported by techcrunch.com:
“But Beats’ bid for another investor comes at a pretty peculiar time. There’s little doubt that HTC wanted to lock up a partnership with Beats because of the marketing clout the brand would bring its mobile gadgets, and now Beats is looking for a way out just as HTC is trying to tap into another vein of star power to revitalizing its anemic marketing efforts. For better or worse, the company is spending nearly a billion dollars on a massive marketing push that will apparently see Hollywood hotshot Robert Downey Jr. spout nonsensical interpretations of the company’s name.”
This certainly isn’t great news for HTC. The electronics company has lost a significant share of the Android market, and they could definitely use a partner like Beats Electronics to help bolster the brand right now.
