Beats Electronics Looks to Drop HTC, Take on New Investor

According to recent reports, Beats Electronics LLC — the company that makes the popular Beats by Dr. Dre headphones — wants to buy out its current Asian partner, HTC, in lieu of a new investor capable of providing “fresh funds” for growth. For Beats Electronics, this may well be a good move, but for HTC, this is just the latest in a line of recent setbacks.

Despite the critical acclaim HTC’s phones receive — its latest flagship, the HTC One, is considered by many to be the best Android phone on the market due to its sturdy industrial design and advanced speakers — it just can’t seem to make much headway in a market dominated by Apple and Samsung.

Speaking of the One, the device was delayed until late April, putting its release after that of the Galaxy S4. The issue apparently led back to suppliers unwilling to provide HTC with certain key components, which were instead being given to Samsung.

History seems to be repeating itself with Beats as the company’s founders — Jimmy Iovine and Andre Young, better known as Dr. Dre — are looking to broaden business to also include speakers, car audio and other consumer electronics, as well as an online streaming music service. The company is now in talks with an investor that could provide debt financing and take a minority ownership stake, according to sources familiar with the matter.

As part of this strategy, Beats hopes to buy out HTC’s 25 percent stake in the company.

While there’s no reason to suspect that Beats is now talking to Samsung to replace HTC as its investment partner, it’s a strong possibility. After all, the Korean electronics giant would be able to provide Beats with everything necessary to support a broader product line and an online service. Either way, HTC is losing a sorely needed differentiator.

This move was a long time coming. HTC has been fickle with its Beats ownership, having dropped its initial Beats investment of 50.1 percent down to 25 percent a year ago — a move that left many investors baffled and implied a lack of synergy between HTC and Beats. Beats also tried unsuccessfully to raise $700 million from the credits market earlier this summer to refinance debt and buy out HTC’s stake.