HP must give up Beats Audio after Apple deal

It can introduce new systems with the sound technology only until the end of 2014; must discontinue sales at the close of 2015

Hewlett-Packard today confirmed that it will drop Beats Audio from its line of high-end PCs and tablets by the end of 2015.

HP and Beats
HP can continue to sell PCs and tablets that include Beats Audio technology through the end of 2015. (Image: HP.)

Beats Electronics, the supplier of the technology HP includes in 15% to 20% of its consumer PCs products, including some of its tablets, will be acquired by Apple, an HP rival in personal computers and tablets.

Apple announced the deal Wednesday, saying it would pay $3 billion -- most of that in cash, with some stock to vest over time -- for Beats Electronics, the Santa Monica, Calif. company best known for its colorful headphones.

"HP maintains the rights through the end of 2014 to offer new products that include Beats Audio, and we will continue to offer an aggressive line-up through the year to include new products that offer the Beats Audio experience," an HP spokeswoman confirmed in an email today.

By the terms of the agreement, HP can continue to sell systems that include Beats Audio for 12 months after the no-new-devices cut-off. By the end of 2015, HP must pull such hardware from the market.

Beats Electronics had licensed the Beats Audio moniker and the underlying technology to HP and others, including smartphone maker HTC. HP first launched Beats Audio-equipped PCs in mid-2010 with its Envy line.

Some of HP's tablets, including upper-end configurations of its Slate 7 and Slate 10 lines, also feature Beats Audio.

The technology, which relies on a software-driven sound equalizer and is optimized for headphone listening -- no surprise since Beats Electronics' revenue is mostly driven by its Beats by Dre headphones -- is used by a few auto manufacturers, including Chrysler, Dodge and Fiat.

HP declined to provide specifics about replacement plans after the Beats Audio deal expires. "HP will continue to develop and offer leading products that include premium technology experiences, including the richest and most dynamic sound experience," the spokeswoman said.

In the March quarter, HP was the No. 2 PC maker, shipping an estimated 12.6 million systems, or 17.1% of the global market, according to researcher IDC. China's Lenovo was the biggest PC OEM (original equipment manufacturer), shipping nearly 13 million machines for 17.7% of the worldwide total.

HP's shipments were up about 5% year-over-year, bucking the industry's overall trend, which saw a 4.4% contraction.

Rival market research company Gartner also pegged HP as the No. 2 maker, and like IDC, said that the struggling Palo Alto, Calif.-based hardware vendor had boosted both its shipments and market share over 2013's first quarter.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at  @gkeizer, on Google+ or subscribe to Gregg's RSS feed . His email address is gkeizer@computerworld.com.

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Copyright © 2014 IDG Communications, Inc.

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