Looks like Dr. Dre jumped ahead to the “Next Episode” in proclaiming himself the next hip hop billionaire, as the The New York Post reports Apple will paying closer to $3 billion for Beats Electronics, not the reported higher figure. All joking aside, the Post calculates that Dr. Dre’s reported 25% stake in Beats will have him netting $750 million if the deal closes for $3 billion.
$3 billion dollars is a lot of money for Beats and Dr. Dre, but not for Apple (AAPL). As Yahoo Finance’s Michael Santoli notes in the attached video, ultimately “is not a big deal for Apple… they’ve probably already earned the free cash flow since the leak first happened a month ago, that’s going to pay for this $3 billion deal.”
The larger issue for Apple, in Santoli’s eyes, is that it’s a “company that has a hard time getting off the dime, onto some new initiatives. Maybe this was just going to be a nice little tuck in, why not do it deal, and all of sudden its taken a month of corporate attention span.”
Another part of the deal that has investors questioning it has been reports that Beats’ streaming music service only has 111,000 subscribers. Not to mention the fact that some analysts see the headphones as high priced substandard products.
The New York Post also claims the Apple/Beats deal will be announced this week. Convenient enough, other reports claim Beats founders Jimmy Iovine and Dr. Dre will be in attendance during Apple’s much watched WWDC, a jamboree for Apple software developers.
Most likely we won’t hear about what’s next for Apple at WWDC, Santoli says, but we may likely see what strategy the Beats acquisition has with future Apple services.
Also hotly anticipated is Apple’s reported move into home automation, i.e. services that will allow users to control lighting, security systems, home audio, from their mobile devices. Investors and Apple analysts will be keenly listening for any news on that front.