Apple Inc.’s (AAPL) recently acquired company — Beats Electronics LLC — has been sued by Audio-equipment maker, Monster LLC. Beats Electronics’ co-founders Jimmy Iovine and Dr. Dre, and HTC Corp. have been reportedly charged for misleading Monster LLC regarding the deal with HTC, before being acquired by Apple in 2014.
The case was filed recently in Superior Court in San Mateo County, CA. Per the news, Monster CEO Noel Lee accused rapper Andre “Dr. Dre” Young and Iovine of stealing the audio engineering that Monster built for the Beats headphones, under a joint project. The suit claims that Monster was primarily responsible for designing the popular Beats headphones.
Further, the accusation charges entail that Beats entered into a fraudulent agreement with HTC when it sold 51% stake to the latter for $300 million in 2011. Reportedly, Dr. Dre and Iovine gained $100 million each and just month after Beats bought back 25.5% of its own shares from HTC, leaving Monster with no rights due to a change-of-ownership clause.
According to reports, Monster played a crucial role in making the headphones after Dr. Dre and Iovine started “Beats by Dr. Dre” in 2006. Beats introduced its first line of headphones back in 2008 in collaboration with Monster. Monster reportedly engaged in developing, manufacturing and distribution activities for Beats in exchange for the licensing rights and celebrity marketing by Iovine and Dr. Dre. Given the change of ownership in 2011, Monster lost intellectual property rights, costing it millions in revenues.
Despite the current litigations, Apple remains hopeful that Beats — its largest acquisition to-date — will remain profitable given its success in music streaming services. In terms of headphone business, Beats Electronics compliments Apple’s product portfolio with its bestselling headphone devices. According to the research firm NPD Group, the company continues to dominate the premium headphone business with a 60% market share in the U.S.
Further, we believe that Beats’ service will complement Apple’s ad-based music-streaming service iRadio offering an edge over Amazon.com's (AMZN) Prime Music and recently launched Music Key by Google’s (GOOGL) YouTube. Further, it will develop into a steady recurring revenue stream for the iPhone maker over the long run.
Apple currently sports a Zacks Rank #1 (Strong Buy). Geeknet, Inc. (GKNT), with a Zacks Rank #2 (Buy), is another stocks in the technology sector worth considering by investors.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment