One year after its stake in Beats Electronics, a company specializing in audio processing,  HTC announced to recede half of the company shares.

HTC had bought 50.1% stake in Beats Electronics, founded by hip-hop impresario Jimmy Iovine and rap legend Dr. Dre. for $309 million in August 2011, in an effort to differentiate their handsets and enhance their brand image in an increasingly competitive mobile landscap.

Beats Electronics is an electronics company that develops and produces headphones and speakers.

But HTC said in a statement over the weekend that they sold 25 percent of their shares back to Beats founders for $150 million. Although it was not clear what prompted HTC’s decision to sell half of its stake, the company said it was to provide Beats with more flexibility for global expansion while maintaining HTC’s majority stake and commercial exclusivity in mobile.

“Under the terms of the agreement, the founding members of Beats will buy back 25% of its total shares for a total of approximately 75% ownership, with HTC remaining the largest outside shareholder with approximately 25%. Over the last year, HTC and Beats have made great progress in sound innovation, product integration and brand awareness with successes like the HTC One. HTC and Beats will continue to work closely, including a joint global marketing campaign later this year,” HTC said in a statement.

Troubled Partnership

At the time of partnership, HTC justified the investment as a way to differentiate itself from the competition, investing in accessories that bring added value to their equipment.

Following the deal, HTC began Beats audio technology integration into certain devices including the Rezound and Sensation XL.  The latest One series, HTC’s attempt to regain its novel market share gains with the initial launch of Android, also uses Beats audio technology, and bundled Beats headphones with certain smartphones.

But a year later HTC realized that Beats sound quality is not the key factor to success in the mobile market.

“An accessory like the headphone doesn’t factor in when someone is buying a smartphone,” Martin Fichter, said an HTC product executive. “If they want a Beats headphone, they’ll buy it directly.”

Although HTC said the deal will foster innovation in the field of audio technology and brand recognition, a partnership between the two companies was not going strong, said Tsung Wong, an analyst at IDC.

“I think Beats wants to take back control over their destiny, and HTC is considering changing its strategy for the phones,” he said.

In its financial reports, HTC announced a decline in profit margins over the past 3 quarters. The company attributed this to fierce competition with Samsung and Apple. In addition, HTC said its latest smartphones in the U.S. market is delayed due to patent disputes with Apple.

Beats Technology Beyond HTC

Beats Electronics started shipping its first product with a line of high-end headphones that carried the imprint of hip-hop artist and producer Dr. Dre. Dre and famed record producer Jimmy Iovine.

After four years, the company has overtaken the market for high-end headphones and entered in new areas. According to a report by NPD, Beats covers 28.7 of the overall headphone category, and for headphones that cost $100 or less, Beats has a 54 percent market share.

Beats hasn’t bet the bank on mobile.  The audio company also has an alliance with HP to bring higher-quality sound from digital music through technology innovation on HP’s devices including laptops, tablets and more.

And its made an acquisition of its own.  After purchasing MOG, the online-music service, Beats is positioned to command what might be considered an end-to-end solution for premium music, extending its brand into the Services space as well.