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SHEIK YERBOUTI
04-11-2003, 03:08 PM
Sorry, another long one.

Does this mean I won't be able to play Jay-Z on my PC? ;)


Apple in Talks to Buy Universal Music
By Reshma Kapadia and Sue Zeidler

NEW YORK/LOS ANGELES (Reuters) - Apple Computer Inc. is in talks to buy the world's largest record company, Universal Music Group, a source close to the matter said Friday, in a deal that could transform the music industry.

The purchase would also reinvent Apple, which is suffering from weak computer demand, new markets for its PCs, software and the iPod digital music player, analysts said.

But the news did raise doubts among Apple shareholders, many of whom had bought the stock because of its cash cushion. Apple shares fell over nine percent in afternoon trading on Nasdaq.

Vivendi for its part would be able to cut its debt and regain investor credibility by selling assets, including its U.S. entertainment assets, known collectively as Vivendi Universal Entertainment.

The Los Angeles Times first reported the talks in an article on Friday that said Apple could offer $5 billion to $6 billion and make a formal bid for Universal Music, which is home to artists like Jay-Z, U2 and Lucinda Williams, before Vivendi's April 29 board meeting.

Vivendi declined to comment on the report and an Apple spokeswoman also declined say anything.

In a related development, billionaire oilman Marvin Davis said he would drop his bid to acquire Vivendi's entertainment assets if it sells Universal Music to Apple, a source familiar with the situation said Friday.

The technology and music industries have been at loggerheads over the ability of consumers to use computers to swap songs for free on online services such as Kazaa.

Universal Music has suffered with the rest of the industry amid declining sales and as the popularity of free music- sharing services and competition with other entertainment outlets cut into profits.

But although Universal's operating profit is down 23 percent, it still dominates the industry, accounting for about one-quarter of all CD sales.

Sources close to Vivendi have said the French company had been moving away from selling the music business, given the poor state of the music industry. But a person familiar with the matter said that, while selling the business may not have been at the forefront of its plans, Vivendi's board would likely entertain an offer it thought was serious.

LOOKING FOR HELP

The music industry is desperately looking for something to get it out of a slump that has lasted at least two years and a technology company's approach might be just what is needed, analysts said.

"It would certainly give a shot in the arm to the music industry's waking up to the digital revolution and, obviously, that's the No. 1 issue that is plaguing the industry today," said Mark May, an analyst at Kaufman Bros.

Companies best poised to play a role in the transformation of the business include Cupertino, California-based Apple, Microsoft Corp., Sony Corp and Intel Corp., industry analysts said.

According to sources familiar with the situation, Microsoft had discussions with EMI Group Plc (news - web sites) as recently as last year to buy the world's third largest label, although the talks came to nothing.

"When the music business tries to (transform the business), there are a 100 different reasons to say no. They have to talk to artists, protect digital rights, etc.," said Josh Bernoff, an analyst at Forrester Research.

A technology company does not have the same hurdles.


"This is about as close you can get to someone really kick- starting this stuff," Bernoff said of the Apple talks. "If Apple goes ahead and does this, they don't need any partners to try it ... In the end, it's not enough to transform the industry, but enough to show it can succeed."

Apple Chief Executive Officer Steve Jobs has long been interested in the entertainment business. He is also chairman of Pixar Animation Studios Inc., purveyor of such blockbusters as "Monsters Inc." and "Toy Story."

"We've heard rumors of this for a long time -- of them buying into media content," said Brett Miller, an analyst at A.G. Edwards, which has a hold rating on the stock. "What they want to do is add legitimacy into the media market itself."