The share price of Apple fell yesterday (May 8th) after rumours started to spread that the company is preparing a massive bid for Beats.
Reports in the Financial Times and other media outlets speculated that a $3.2 billion (£1.9 billion) bid could be on the table, which would be Apple's largest acquisition so far by a distance.
Music producer Jimmy Iovine and hip-hop star Dr Dre founded Beats in 2008 and the company's famous chunky headphones quickly became ubiquitous. The company later announced a music streaming service as a direct competitor to services such as Spotify.
It is only a few months since Beats took a $500 million (£295 million) investment from Carlyle that valued the company at more than $1 billion, meaning Apple would be paying a heavy price for the firm if it was to move forward with a deal.
Richard Lane, analyst at Moody's, said: "In terms of acquisitions, Apple has been very, very light in their activity. I don't think they’ve spent $1 billion in any of the last four years."
The launch of Beats Music may have spooked Apple into pursuing a deal for the company, as the services looks set to become a dangerous competitor for Apple's iTunes product. Subscription is a rapidly growing area of the music industry, while digital sales have been an area of concern for artists and record labels alike.
Apple chief executive Tim Cook stated recently that his company was "on the prowl" for new acquisitions, prompting speculation linking Apple with a potential takeover of various up-and-coming new technology businesses.
While Google and Facebook have been regularly vacuuming up promising new businesses – often with a large price tag for the privilege – Apple has been lagging behind in this area for the last few years.
Facebook made headlines with its takeover deal for photo-sharing app Instagram, while a deal for Snapchat was rumoured to be on the table from Mark Zuckerberg's company as well. Facebook also recently completed a huge deal for instant messaging service WhatsApp.
Apple stocks fell 0.73 per cent yesterday, dropping 0.26 per cent in after-hours trade.
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