Beats Audio Bought Back Shares After HTC Failed To Meet Contractual Obligations

The Beats Audio buyback program for HTC shares came about because HTC was not fulfilling certain contractual obligations it had agreed to when purchasing a stake in the company. According to sources close to the deal HTC’s own troubles meant the company couldn’t meet financial commitments to Beats which led the company to sell 50% of its overall shares.

HTC owned 50.1 percent of Beats Audio shares after purchasing the majority ownership stake in August 2011. HTC had promised to offer certain financial support or payments from HTC, support the company could not meet.

HTC had purchased a controlling share in the company for $300 million. As part of the deal HTC gained exclusive access to Beats technology for the mobile market.

As the Samsung Galaxy line of devices and Apple iPhones have continued to take over more of the market HTC has been unable to fully support Beats Audio. HTC recently announced that the red Beats Audio earbuds sold with premium Beats Audio smartphones were being pulled because buyers did not want to pay a premium for better sound quality on their smartphones.

Beats Audio will now control 75 percent of the company while HTC will still own a 25 percent stake in the organization along with exclusive smartphone and tablet use.

Beats Audio executives say the buyback share program will give them the control they need to expand globally. Beats Audio currently controls 28.7 percent of the overall headphone category and 54% of the market share for headphones that cost $100 or more.

Do you think Beats Audio is better off controlling its own destiny in place of HTC control?