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Yesterday it was revealed Beats Audio will buy back shares previously sold to HTC. Today sources have revealed why.

Sources familiar with the matter spoke to CNET and revealed the buyback occurred because HTC wasn’t able to fulfil some of its contractual obligations.

Last August, Beats sold 50.1% of its shares to HTC in a deal believed to include financial backing or an ongoing payment from HTC. The majority share gave HTC exclusive rights to Beats technologies which the company put to work in its smartphone range, along with a controlling stake in the company.

Over the last year, HTC’s smartphone dominance has slipped and the company has endured a management shakeup. The company spent the year releasing a string of similar smartphones with little success, and is only now returning to form with its One X.

These smartphones were initially bundled with Beats headphones and the audio company’s custom software, but for reasons unexplained, Beat headphones are no longer included.

Once the buyback goes through, shares will be split 75:25 between Beats and HTC respectively. Beats representatives believe the deal will give the headphone company the flexibility to expand globally, increasing its 28.7% market share of overall headphones, of which 54% $100 or more.


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