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Beats Electronics courts a new, secret investor as it fights to free itself from HTC

The deal between Beats Electronics and HTC hasn’t been great, and Beats wants out.

The headphone maker is looking to buy out HTC’s remaining share of the company to make room for a new investor, sources tell The Wall Street Journal.

Inked in 2011, the $300 million deal between the two companies gave HTC a 50.1 percent share in Beats. The move was a part of HTC’s effort to capture the interest of the young and hip, many of whom have been smitten by HTC’s fashionable (and largely over-hyped) headphones.

In spite of Beats’s mass appeal, however, the company’s branding hasn’t done much to boost the prospects of HTC, which has watched its marketshare and share price dwindle over the past few years.

Equally rough has been the HTC/Beats deal itself, which has probably cost HTC more money than its made the company. Last July, HTC sold back nearly half of its stake in Beats, leaving it with just a 25 percent share. The move, which cost it an estimated $4.8 million, was a major blow to HTC, which saw its profits shrink by 79 percent during the third quarter last year. (And, no, things are not looking up these days either.)

Rumors of Beats’s courtship of a new investments come as the company preps for the launch of Beats Music, the streaming music service it announced back in 2012. While we don’t know much about the service (other than the fact that Nine Inch Nails rocker Trent Reznor is involved) we do know that the move is a part of Beats Electronics’s attempts to position itself as more than just a maker of headphones.

The other question is who, exactly is this mystery investor? Right now we’ve got precious few clues, but if the rumors are correct, we’ll know in only a few weeks.

Copyright 2013, VentureBeat

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