HTC had bought 50.1 percent of Beats Electronics last year in August in order to enhance its phones, and keep up with the rising competition in the mobile space. However, the company has now sold back 25 percent of the shares to the founders of Beats Electronics for $150 million. After this announcement, HTC’s shares fell by 4 percent. The mobile phone maker maintains that it will continue to work closely with Beats Audio.

Adding more to the mix

HTC smartphone flaunting Beats

“We find HTC's announcement of cutting back its investment in Beats puzzling. 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”, said Morgan Stanley in a research report. The report also said that the whole deal, starting from the acquisition to the disposal did not make much strategic and financial sense to HTC shareholders, without disclosing any further details. Last year, HTC had bought the 50.1 percent stake at Beats Electronics for $309 million. There are speculations that HTC’s made the move then due to growing competition from Samsung. The audio enhancement was incorporated to set apart HTC handsets from others available in the market. However, HTC remains Beats' largest shareholder with 25.1 percent, with Beats' founders holding the remainder and reportedly holds a 25.57 percent voting right. Some models of HTC’s latest One Series also come equipped with Beats Audio technology.

The first handset to come out of HTC’s stable with the Beats logo was the Sensation XE with Beats Audio. A number of its devices have  featured this branding since. With the branding, HTC also bundled up Beats headphones or earphones as part of its package, giving users an option to experience music the way the artists intended. However, reports in April said that the brand will no longer be bundling Beats earphones or headphones as part of the box contents of their smartphones.

HTC’s Beats unit also bought MOG, a digital music subscription service. There were reports about Beats Electronics close to buying MOG for an undisclosed sum in early March. However, HTC refused to spill details by saying that it doesn’t comment on rumours. MOG was founded in 2005 by Hyman and has raised $33 million from its two main backers, Menlo Ventures and Balderton Capital. 50 percent of the business is online subscriptions. The other half is its advertising network called MOG Music Network, which places ads on more than 1,700 music sites. It was then believed that MOG could be integrated as a discounted offer to buyers of Beats' popular 'Beats by Dr Dre' headphones, HTC smartphones, or in laptops made by Hewlett Packard, with which Beats has a separate partnership.


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