HTC returns half of Beats Electronics stake for $150M

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Less than a year after purchasing a 50.1 percent majority stake in audio technology firm Beats Electronics for $309 million, HTC is selling back 25 percent to Beats founders for $150 million.

The share sale "provides Beats with more flexibility for global expansion," HTC said. The mobile device manufacturer remains Beats' largest shareholder with 25.1 percent, with producer/Interscope-Geffen-A&M chairman Jimmy Iovine and hip-hop icon Dr. Dre--who founded the company in 2006--now controlling the remainder. HTC added it will continue working with Beats to develop audio experiences optimized for mobile devices, and will retain exclusive mobile rights over those technologies. In a separate statement, HTC said it will lend Beats $224.9 million for one year.

HTC's move raised questions about its strategy. "We find HTC's announcement of cutting back its investment in Beats puzzling," said Morgan Stanley in a research report. "Reducing its holding to 25.57 percent signals HTC's separation from Beats' operations. Possibly it implies that there was not much synergy between the two companies from the beginning." KBC Concord Asset Management Investment and Research Manager Henry Chen said mounting competition from rival Samsung Electronics could be forcing HTC to adopt a more conservative and centralized business model.

Earlier this month, Beats Electronics acquired digital music service MOG for an undisclosed sum. At that time, Beats said MOG will continue to operate as an independent company, with no immediate changes to its streaming services or impact on subscribers. MOG offers desktop users free, ad-supported access to 15 million songs--a $9.99 monthly premium option includes mobile streaming features.

Rumors of the MOG acquisition first surfaced in March, with multiple outlets reporting HTC and Beats were sizing up the company to create an all-you-can-eat mobile music service available across HTC devices and Beats headphones. GigaOM previously reported that HTC is building its own streaming media platform to differentiate its Android smartphones and tablets from rival devices, while at the same time threatening the dominance of digital media upstarts like Spotify.

For more:
- See this Reuters article

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