- Bloomberg reports Apple (AAPL +1.3%) became interested in Beats after trying out its subscription streaming service, which has won praise for its personalization tech - it combines human curation with recommendation algorithms, and takes a user's mood/environment into account. The news service adds Apple plans to work with Beats to "improve the quality" of its headphones, which have a loyal following but also plenty of audiophile critics.
- Billboard and the WSJ report Dr. Dre is set to join Jimmy Iovine (previous) as an Apple employee once the Beats deal goes down. Billboard adds the Beats co-founders could take the stage at Apple's June 2-6 WWDC developer conference.
- Many on the sell-side aren't thrilled with the Beats reports. Uber-bull Gene Munster: "We are struggling to see the rationale behind this move. Beats would of course bring a world class brand in music to Apple, but Apple already has a world class brand." He speculates Apple's biggest motivation is adding Iovine to its ranks.
- UBS' Steve Milunovich offers a more positive take: He thinks Apple might be paying less than 3x sales for a high-margin brand, and sees Beats' offerings strengthening Apple's streaming and wearables efforts. Milunovich also sees "philosophical compatibility" between Apple and Iovine.
- BTIG's Walter Piecyk isn't a fan, but isn't too worried either. "$3 billion is less than 2% of the company’s cash and less than 10% its annual free cash flow ... we are more interested in further exploring our belief that rising upgrade rates in the [U.S.] could provide a nice tailwind for Apple in [2H14]."