DionRabouin.com (sort of)

Dr. Dre and Beats Electronics Get $150 Million Back From HTC

Posted in Features by dionrabouin on July 27, 2012

By Dion Rabouin


(Written for BLAC Magazine)

Last week, 50 Cent told UK website DigitalSpy, “I don’t know exactly if you’ll hear the full body of work—the full body of Detox.”

Fifty said that Dr. Dre has had too much time with the music and has been dropping tracks from the album left and right. “It’s an interesting scenario, but with the success of Beats headsets, I don’t think they’re hard-pressed for Dre’s album to sell,” he said.

Dre may have another reason to focus his energies elsewhere. He, founder Jimmy Iovine and the rest of Beats Electronics have agreed to a deal buying back half of the share of Beats they sold to Taiwanese cell phone maker HTC last year. Neither party gave a reason for the return of investment, but this seems like a classic case of, “On second thought, can we have our money back?”

According to the LA Times, HTC has sold 25 percent of their shares back to Beats Electronics for $150 million. The company originally bought 50 percent of the company for $309 million, in August 2011. As is often the case with deals gone bad, it looks like the two parties have decided to split the difference, but HTC will be leaving at least $4.5 million on the table as a sort of “handling fee.”

Dre, Iovine and the rest of the Beats team now own 75 percent of the company, along with investors like Monster Cable and Hewlett Packard. According to HTC, the sale “provides Beats with more flexibility for global expansion while maintaining HTC’s major stake and commercial exclusivity in mobile.”

In the terms of their original deal, Beats was not exclusive with HTC even before the split. In addition to HP, Beats was also working with Apple, Chrysler and a number of other companies.

That lack of commitment may have been part of what drove the split. HTC has been losing big in the smartphone market, particularly to Apple, a company making use of Beats’ technology.

HTC reported earlier this month that they had seen a 27 percent decline in second-quarter revenue and a 58 percent drop in net income. HTC is also in the middle of a legal battle with Apple over a number of patents that actually predate the invention of smartphones themselves.

That explains why HTC wants to sell, but why would Beats want to buy? It looks like the Beats team is looking to expand.

Luke Wood, an executive with Beats, said earlier this summer that the company expects to double its workforce from 150 to about 300 employees by the end of the year. With news like this, it sounds like Dre is committed to making headphones and putting Beats audio in anything and everything that plays music. That probably doesn’t bode well for folks waiting on “Detox” to drop.

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