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HTC to buy majority stake in headphone maker Beats

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Taiwanese smartphone giant HTC is set to make a deal with Dr. Dre. HTC plans on investing $300 million for a majority stake in the rapper/producer/Dr. Pepper spokesman’s Beats Electronics, makers of high-end headphones and digital sound technology.

The deal is for a 51% stake in the company based on HTC’s valuation of Beats at around $600 million. HTC will be able to fund the deal with its own cash, which is expected to be in the region of $2.4 billion in the third quarter. For all that money, HTC gets a company that is expected to top $350 million in revenue this year and secures Beats’ technology exclusively for their smartphones.

The move looks like an attempt by HTC to put more emphasis in its mobile line on quality sound. Despite most smartphone owners using their phone as a portable music player, there’s been a dearth of smartphones that have put music at the forefront. 

More importantly for HTC, collaborating with Beats should help beef up the Taiwanese brand. This should hold especially true in the U.S., where the company hasn’t had the brand recognition of fellow Android phone producers Samsung and Motorola. Being able to specifically advertise quality sound production should help, and in the U.S. having Dr. Dre sign off on something will almost always provide an image boost.

Beats CEO Jimmy Iovine (yes, that one) spoke with AllThingsD and said the deal with HTC doesn’t affect Beats’ current deal with HP for computer audio. In fact, Iovine said Beats was looking to license its technology to any devices that it could in a quest to offset the stereo-to-mp3 music media shift that’s left “an entire generation lost to bad-sounding music.”

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