“The basic problem with evaluating Beats as an investment for Apple is that it’s not a publicly traded company, so we on the outside have very little to go on,” Mark Hibben writes for Seeking Alpha. “The information about Beats as a business investment is pretty sketchy. There’s the report from July 2013 that Beats might hit $1.4 billion in revenue that year, but no confirmation of whether they hit that number or even got close, let alone turned a profit. The Carlyle Group’s (CG) reported investment of $500 million provides some vote of confidence. In their announcement of the deal, Carlyle also made note of Beats’ better than 60% market share for over $100 headphones.”
“I’m absolutely certain that the meeting took place as reported. Probably Adrian Perica, Apple’s M&A chief, and Eddy Cue were there,” Hibben writes. “There is one piece of information that Apple would consider covered by the NDA: the fact that the meeting took place. The NDAs have the force of a contract, but I’ve never heard of Apple suing anyone for violating an NDA. Apple doesn’t need to. Apple’s big stick to enforce the NDA is that violating it jeopardizes the prospective acquisition. Under the circumstances, most candidates for acquisition keep a low profile until the deal is done. That didn’t happen with Beats, and that’s the big red flag that calls the acquisition into question. It’s not clear what happened, but based on the now infamous Dr. Dre video, the leak probably came from inside Beats. Perhaps the people at Beats assumed on the basis of the meeting that it was a done deal. If so, they shouldn’t have.”
“By violating the NDA, the Beats management marked themselves as not fitting in with the Apple culture of secrecy. Beyond that, Apple probably has no choice but to pull the plug on the deal, if only to ensure that future NDAs would be respected,” Hibben writes. “Is it possible that the deal might still happen? I can’t completely rule it out, but given that I don’t think Apple was that strongly motivated in the first place, I’m not holding my breath.”
Read more in the full article here.
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Dr. Dre boasts of Apple-Beats deal in YouTube video, on Facebook – May 9, 2014