GENE MUNSTER: Apple Buying Beats 'Sounds Like A Bad Idea'

After news broke that Apple was in late stage talks to acquire Beats Audio for $3.2 billion, Piper Jaffray analyst Gene Munster put out a note.

Munster is not into this deal. He says, it "sounds like a bad deal." He adds:

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 (i.e., there are no non-Apple sub-brands under the company umbrella). Separately, we are not aware of any intellectual property within Beats that would drive the acquisition justification beyond the brand. We view a better use of capital for acquisitions to be in the internet services space given that is, in our view, Apple's biggest weakness. This list would include Yelp, Twitter, Square and even Yahoo.

We, too, are struggling with this one. Apple doesn't need the Beats revenue, which is ~$1 billion annually. Apple's annual revenue is almost $180 billion. As for the streaming service, it's hardly got any users, and is not well received by critics.