It looks like Apple may be putting some new cash flow to good use by purchasing Netflix. Yes, while no talks have actually taken place between Apple and Netflix currently, at least not that we know of, it's now been put forward by Citi analysts that there's a 40 percent chance that Apple attempt to purchase the streaming giant. There are others who have their doubts about it actually happening. This comes months after rumors swirled that Apple was buying Disney for $200 billion.
Due to the new tax cuts that are in place, thanks to President Trump's tax plan, Apple will have $252 billion in cash, which is currently locked up in foreign jurisdictions but can be brought to the U.S. under the new tax plan. Citi analysts Jim Suva and Asiya Merchant, based on this upcoming influx of cash, have assessed that Apple has a decent chance of trying to purchase Netflix, who is currently the leader in the streaming marketplace, although we reported in August that Netflix is $20 billion in debt. Here's what the duo had to say about it.
"The firm has too much cash, nearly $250 billion, growing at $50 billion a year. This is a good problem to have. Historically, Apple has avoided repatriating cash to the US to avoid high taxation. As such, tax reform may allow Apple to put this cash to use. With over 90% of its cash sitting overseas, a one-time 10% repatriation tax would give Apple $220 billion for M&A or buybacks."
According to their estimation, Apple would only need roughly a third of that cash to purchase Netflix. This might have seemed a lot more crazy just a couple of months ago, but given Disney's recent purchase of most of 21st Century Fox, anything seems possible. On the flipside of this prediction, a separate report from Forbes throws a reasonable amount of skepticism on the fire. By Forbes' estimation, it wouldn't make any sense for Apple to purchase Netflix, given that they are already investing heavily in their own original content.
"Apple has already committed $1 billion towards creating new shows and their largest acquisition was buying Beats for $3 billion in 2014. Why would they spend $75 billion to buy Netflix? It would be a desperation move that would raise a white flag and signal a major organizational shift in philosophy."
Interestingly, there were rumors that Disney was looking to purchase Netflix early last year, long before talk of the Fox purchase came up. This also isn't the first time Apple purchasing Netflix has come up. It's also worth noting that Citi did make an assessment before Disney purchased Fox, similar to what they've done here with Apple possibly purchasing Netflix. This report from Business Insider, even at this stage, is well worth thinking about, as it would represent yet another massive consolidation in the media landscape, which has been a concerning issue as of late.