Confirmed: Apple acquires Beats for $2.6B and $400M in stock

Confirmed: Apple acquires Beats for $2.6B and $400M in stock

Summary: After three weeks of rumors, it's finally official. Apple has acquired subscription streaming music service Beats Music, and headphone maker Beats Electronics.

Confirmed: Apple acquires Beats for $2.6B and $400M in stock - Jason O'Grady
Photo: CNET/CBS Interactive

Apple on Wednesday confirmed it has acquired the headphone maker and music streaming service Beats.

In a press release, Apple said it acquired the company for approximately $2.6 billion in cash, plus $400 million in stock that will vest over time. 

Beats co-founders Jimmy Iovine and Dr. Dre will join Apple as part of the deal, the iPhone and iPad maker said.

The deal is expected to close in the fourth quarter — around September — the same fiscal three-month reporting period when the new iPhone is expected to be unveiled, according to earlier reporting.

The Beats purchase comes after a leak of the news earlier this month. The final price is significantly less than the $3.2 billion that was originally published by the London's Financial Times earlier this month.

Beats will remain a separate brand from Apple's, and the company will offer both Beats' streaming music and headphones, along with its own branded headphones.

Apple's chief executive Tim Cook said in prepared remarks: "Music is such an important part of all of our lives and holds a special place within our hearts at Apple."

"The addition of Beats will make our music lineup even better, from free streaming with iTunes Radio to a world-class subscription service in Beats, and of course buying music from the iTunes Store as customers have loved to do for years," according to Apple's online software and services chief Eddie Cue.

In Apple's fiscal second quarter in April, Apple's iTunes (Software & Services) division generated $4.57 billion in revenue — up from $4.1 billion in the same period a year earlier, up by Wall Street expectations. It comes as the iPhone and iPad maker is increasingly pushing its services to the cloud in order to generate long-standing revenue from apps, music, and games.

Correction at 9:35pm ET: Apple's Q2 revenue for iTunes was $4.57 billion, not $3.57 billion. 

Topic: Apple

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  • Makes sense

    With Apple trying to remain relevent in Mobile and keep their marketshare in the US, adding beats to the mix makes apple seem more "Audiocentric". Might help with the younger generation on choosing their first/next device as well.

    I see this as a companion to Apple marketing, rather than a detraction from Apple's core products.
    • losing the cool factor

      I'm frankly a bit puzzled by this acquisition. On the surface it would seem to make sense though it represents a couple of things to me. 1) iTunes music has been a failure 2) Apple is losing its "cache" and needs Beats to restore it? Not a good sign. 3) What does this say about Jony Ives? They had to acquire creative talent via Beats?

      I think it's an interesting acquisition but I remain puzzled.
      • Jony Ive is more of the design guy

        where Jimmy Iovine and Andre Young are music guys through and through.
      • Itunes has been a success but

        there is a new wave of streaming music taking over. Just look at the cost to the consumer unlimited songs for 9.99 a month compared to .99 a song for download.
  • Math?

    How is $3.57B up from $4.1B over the same period last year? Must be new math?
    • "...division generated $3.57 billion in revenue — up from $4.1 billion..."

      Which means it has increased to $7.67, which is a colossal amount!!!!!!!!!!!
    • Small typo...

      The post has been corrected. Thanks for pointing that one out!
  • This is wonderfull news!

    Hopefully Apple won't license Beats to HP and they will look elsewhere because everything Beats I've owned was the worst sound quality. I can only hope that there will be usable volume and audio quality on my next HP without Beats!
    • I totally agree about Beats headphones and speakers.

      Overpriced garbage. I read somewhere that a pair of their headphones only cost between $7 and $20 to make, depending on if it was one of the cheap-looking plastic sets or the high-end metal models.
  • Confirmed: Apple acquires Beats for $2.6B and $400M in stock

    The cost of the headphones is about to go up $100.
  • If Apple is buying Beats just to own Beats

    then I understand it as an investment play and as a way to get Iovine to closely work with Apple.

    but if Apple intends to make Beats a part of the Apple Family? Then I don't understand the logic.
    • Here's the logic

      The logic is Apple is running out of affluent White folk who want to buy Apple products. They need another fix of people willing to shell out for a product more about coolness and fashion then quality or technology. Apple buys Beats and gains a very popular product line with ethnic youth and they seem to have money to spend of expensive headphones and are prone to impulse buying habits.
      This is a market that Apple needs to tap and $3 billion is chicken feed to get that traffic in their stores and web site. The logic of course only will work if this group actually likes Apple products?
      This could backfire and Beats could become a product that will now become not so cool product to that same ethnic group? Not sure if Apple is now drawing short straws or what. But it does start to appear Apple needs more first time Apple buyers.
    • I bet this was more of a play for the music service

      than for the headphones. The $80 pair of earbuds Apple used to make were far better than anything from Beats, and the iPod HiFi, while ugly as sin, sounded better than any Beats audio system.
  • Targeting ethnic youth?

    Not sure Beats in anymore then a fashion statement. I have listen to their best headphones and they are anything but good sounding. I guess if you like thumping bass with muffled treble and lacking midrange (drowned out by bass) then buy them. But then again anyone who buys lousy expensive headphones might be just the impulse buyers Apple wants.
  • poor ol" apple

    Appears the gloss has well and truly worn off, drop ya prices and bend over apple this is the only way you will regain any interest in your out-dated over the top too expensive iTunes and devices, we know you along with adobe etc. just can't believe how easy it was getting away with screwing us oz consumers for so long.
    Not to mention screwing your own home country along with all the rest of the profit at any expense tax dodging big league brands.
  • How quickly we Monster Dropped Beats for a number of reasons

    To Monster, Dr. Dre was too much liability to continue as a revenue generating mechanism. Apple claims that he brings value, I want to know how they are going to keep people syncing their headphones for the latest firmware release? This is obviously aimed at people who would never allow their children access to his music, yet will buy "Apple" headphones promoting Dr. Dre inadvertently.
    • should be: How Quickly We Forget! sorry

      see above
    • Monster used Dre to do initial research into headphone tech

      and then came along with their own headphones once they figured out that the sound Dre went for, well, sucked. Monster's own headphones aren't much better.

      I'd rather pay half the price for a pair of good Sony headphones instead.
  • Hmmmm

    Definitely overpriced. Not worth that amount when their primary area is headphones. Dre & Iovine must be running to the bank to cash their checks.
    I think most Apple gadget fans have agreed that the ear buds included suck. Wondering if Apple will switch to Beats ear buds but that could jack up the price of their gadgets.
  • yet more fashion victims to be exploited.