Marshall Hargrave: Based on the valuation of Apple Inc. (NASDAQ:AAPL) and Wall Street sentiment, many believe that Apple has lost its touch.
Has the tech giant resorted to buying innovation?
Apple is making its largest acquisition ever, buying Beats for $3 billion.
The $3 billion it plans to spend on Beats will barely dent its cash hoard.
It had over $140 billion in net cash last quarter, which covers just around 25% of its market cap.
Even still, many on Wall Street still question the deal. Piper Jaffray noted:
“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 and has never acquired a brand for a brand’s sake.”
Beats was founded in 2008 by rapper Dr. Dre and music industry executive Jimmy Iovine.
The two cofounders are a couple of the most respected names in the hip-hop industry.
Beats represents the hip hop culture.
Hip hop has easily been one of the fastest growing cultural movements over the last twenty years.
The company is more than just a brand; it’s part of a cultural movement.
Hip hop is not just music, it’s a culmination of music, art, language and fashion all rolled together.
But the market has failed to recognized how hip hop artists could restore Apple.
While the acquisition will propel Apple further into the music industry, the strategy is much more than just that.
Apple is gaining three distinct “assets” that it can use to tap into a culture that will only continue to grow.
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