HTC sells Beats stake, acknowledges failed partnership

September 27, 2013 08:40 AM ETIDG News Service - HTC is selling back the remainder of its stake in Beats Electronics, shedding its financial ties to the headphones vendor in a partnership that did little to help turn the smartphone maker's fortunes around.

HTC on Friday said it would sell off its 25% stake for $265 million, according to a Taiwan stock exchange filing. In addition, the company will receive $150 million and accrued interest from Beats at a later date as part of a promissory note. The deal will close in the fourth quarter.

The stake sell-back ends a partnership that lasted only two years, and was originally heavily promoted by HTC as a way to differentiate its phones from rival handsets.

The U.S.-based Beats is perhaps known for its ties to rap artist Dr. Dre, who helped found the company. In August 2011, HTC bought a majority stake in Beats for $300 million. As part of the deal, HTC decided to incorporate the company's headphones and audio technology into its own handsets.

Since then, however, HTC's smartphone market share has declined on fierce competition with Apple and Samsung. Its also posted a string of weak earning reports, with the company's second quarter net profit down 83% year-over-year.

Last year in July, HTC scaled back its financial ties to Beats and sold off half of its majority stake in the company for $150 million. At the time, HTC said the move would give Beats more flexibility to expand globally. But analysts also said the Beats partnership had failed to give HTC a significant edge over its rivals.

On Friday, HTC signaled that it no longer needed Beats' expertise in audio technology. In its stock exchange filing, the company said its own "HTC BoomSound" tech could deliver superior audio in mobile phones.

The Taiwanese smartphone maker, however, added that the two companies "will continue to partner as future opportunities arise."

As HTC cuts financial ties with Beats, U.S. private-equity firm Carlyle Group said on Friday it was buying a minority stake in the headphones company. As part of the investment, Carlyle Group will help Beats expand its business both in the U.S. and globally.

Carlyle Group is buying the stake for $500 million, according to a report from The Wall Street Journal.

Reprinted with permission from IDG.net. Story copyright 2012 International Data Group. All rights reserved.

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IBM sells customer care outsourcing unit for $505 million

Citing low profit margins, IBM has sold its customer care outsourcing business to Synnex for $505 million, the companies said Tuesday.

Synnex will combine the IBM business with its wholly owned subsidiary Concentrix, which operates in a similar field. Synnex will pay approximately $430 million in cash and $75 million in stock for the IBM business.

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"One of the most exciting things about this acquisition is being able to broaden our knowledge and vertical industry depth by the talent that is coming across from IBM," Concentrix President Chris Caldwell said in a teleconference.

IBM spun off the business unit as part of a long-running effort to shift its focus to areas in which it would make larger profit margins. It follows its divestiture of other relatively low-margin businesses, such as PCs, hard drives and point of sale (PoS) systems.

"This agreement is good for IBM as it furthers our focus on growing our software and cloud-based CRM [customer relationship management] solutions as part of [our] continuing shift to high value and innovative spaces," said Lori Steele, general manager of IBM Global Process Services.

Despite the sale, IBM says it will remain in the field of business process outsourcing (BPO), in which it runs entire business functions for some customers.

To that end, in 2012 IBM purchased Kenexa for $1.3 billion to strengthen its human resources business process services. And a year earlier it bought Emptoris to boost its portfolio in supply chain management services.

IBM will still have a foot in the customer care market as well, by selling software, consulting and other services that employ analysis software to personalize customer care.

Concentrix will become an IBM business partner and the companies will pursue business opportunities together, they said.

Concentrix runs customer care call centers on behalf of businesses such as banks, insurance firms and health care companies. It also provides front and back office services for retail stores and banks, and processes claims for insurance companies.

The IBM deal should bring it greater economies of scale, Caldwell said. With the acquisition, Synnex expects Concentrix to become one of the 10 top providers of CRM BPO services, a market that generates more than $55 billion in work annually, according to Synnex.

Joab Jackson covers enterprise software and general technology breaking news for The IDG News Service. Follow Joab on Twitter at @Joab_Jackson. Joab's email address is Joab_Jackson@idg.com.

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