Apple Inc (NASDAQ:AAPL) has been losing profits because its iPhones aren’t selling like they used to in emerging markets like China and India. The smartphone itself is becoming something of a commodity in these parts of the world. Keep in mind, that developing economies are getting their own brands that can manufacture these smartphones and offer them in the market for lower prices.
Shareholders are concerned
Apple investors are worried and rightly so because Beats is selling headphones which are also increasingly getting the commodity tag. Headphones and earphones are a hotly competitive market with other brands like Skullcandy Inc (NASDAQ:SKUL) and HTC among others already having dominant positions. Now Apple wants to acquire a company famous for its $300 headphones. Is this even a good move?
The answer comes in the form of Beats offerings and whether $3.2 billion is a justifiable price to pay for them. Apple does have a cash hoard – $160 billion to be exact. But does it need to be spending a small fortune (in Apple cash holding terms) on buying Beats? It’s true that Beats has more than just a range of headphones. It counts speakers and various home audio accessories in its impressive range. Not to mention the fact that annual revenues for the companies are close to a couple of billion dollars.
This might be Apple’s way of showing investors that they are also aggressive in their strategy think Google, Facebook and are not going to be left behind when it comes to innovation plays. After all, an acquisition of a company like Beats Electronic will provide Apple with a steady stream of revenues in the form of even more accessories. It will also be able to kill of some of its competition at the expense of cannibalizing some of its own products – Apple earphones, speakers, etc.
All in all, Apple needs to make some big moves right now in order to stay relevant. If the Beats deal closes, then we can interpret it as CEO Tim Cook’s way of showing he is also like Steve Jobs – piercing, unpredictable and vibrant.
Apple is one of the most hotly traded stocks in binary options and that is why we aspire to cover them as often and as accurate as possible. In this article, we looked at fundamentals. But I can assure you that we will have something on pure technicals in the coming weeks and months.
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