Beats Electronics, maker of Beats Audio and the popular Beats By Dr. Dre line of headphones, has bought back a quarter of the company from Taiwanese electronics company HTC. The repurchase increases Beats’ ownership share to 74.9% from 49.9% and reduces HTC’s share to a minority 25.1% stake from a majority 50.1% share.
A joint statement explained the two companies are “realigning their agreement to provide Beats with more flexibility for global expansion, while continuing HTC’s commercial agreement and exclusivity in mobile.” The statement went on to say HTC and Beats will continue to work closely and will initiate a joint global marketing campaign later this year.
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But HTC did not meet its financial obligations, according to a report at CNET. Management changes and losses in HTC’s market share were also factors in the two companies’ decision to scale back HTC’s ownership in Beats, the report claims. At press time, reps for Beats and HTC had not responded to Billboard.biz’s requests for comment.
HTC needs to focus on its core business and address the market’s sagging belief in the company. Traded on the Taiwan Stock Exchange, HTC hit its 52-week low Monday and has fallen 71% since July 27, 2011. Shares of HTC fell 4.3% on Monday. According to IDC, HTC’s global smartphone market share fell to 4.8% in the first quarter of 2012 from 8.9% a year earlier.
Given Beats’ long-term goals, it may make sense for HTC not to be a majority owner. As president and chief operating officer Luke Wood told Billboard.biz two weeks ago, Beats’ mission goes beyond any single company. “We value greatly what we’ve done with HP, but we ultimately believe the user experience around audio should be incredible on any computer. We really want the opportunity to reach out and scale what we do with Beats Audio.”
Beats and HTC have not disclosed how they will integrate music subscription service Mog into their partnership. Beats announced its purchase of Mog in early July for the price of $14 million, according to HTC’s investors page.