Missing a Beat? HTC to sell half its stake in audio firm

23 Jul 2012

Ailing smartphone maker HTC is selling half of its stake in audio electronics player Beats Electronics in another maneuver that suggests the Taiwanese manufacturer’s problems are far from over.

HTC bought a 50.1pc stake in Beats to give its brand some kudos among the music-loving youth. Instead of the dulcet tones of victory, the company’s performance in recent months sounds more like a funereal dirge.

In recent months, HTC’s profits plunged 57pc due to poor sales in Europe and the US.

HTC will be selling 25pc of Beats back to its owners for US$150m.

HTC seen but not heard?

It is likely HTC will use the cash to invest in its brand, which is being drowned out by Apple and Samsung in the marketplace.

HTC said in a statement: “HTC and Beats today announced a realignment of their business agreement that provides Beats with more flexibility for global expansion while maintaining HTC’s major stake and commercial exclusivity in mobile.

“Under the terms of the agreement, the founding members of Beats will buy back 25pc of its total shares for a total of approximately 75pc ownership, with HTC remaining the largest outside shareholder with approximately 25pc.

“Over the last year, HTC and Beats have made great progress in sound innovation, product integration and brand awareness with successes like the HTC One. HTC and Beats will continue to work closely, including a joint global marketing campaign later this year,” HTC stated.

Beats Audio was founded in 2006 and its first product was the distinctive Dr Dre headphones. An exclusive contract was granted to Monster to manufacture and develop Beats-branded headphones for five years.

In August 2011, HTC acquired a 51pc majority stake in Beats for US$300m.

It emerged earlier this year that Beats and Monster would not renew their production partnership at the end of 2012.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years