Apple tipped to buy Netflix as streaming war gets serious

With Donald Trump's aim to cut corporate taxes, alongside a one-time chance for companies to bring cash back to the USA from overseas without accruing a large tax bill, Apple will have a much bigger budget to buy new companies.

On the other hand, Apple may benefit highly from buying Netflix as a result of President Trump's tax policy created to bring overseas corporate money back to the US. It fluctuates, since it's pegged to Netflix's stock price, but the company's market value pushed past $80 billion in 2017, and is expected to scrape the $100 billion mark if its stock continues to rise.

Jim Suva and Asiya Merchant say the potential takeover is a result of President Trump's corporate tax cut, which allows companies a one-time allowance to repatriate money from overseas without being hit by a massive tax bill. The analysts said there is a 20 - 30 percent chance of an even bigger deal between Disney and Apple, but the report was written before the Disney/Fox acquisition.

Apple's answer to this crisis was to invest $1 billion dollars in original video content production, as reported by Wall Street Journal in August 2017. The company has not been able to bring back the money to the US because of the previous high tax fees, analysts say.

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Not only that, but the opportunity to repatriate money held in offshore accounts without paying a bunch of extra taxes means that Apple can bring the cash necessary for the purchase back into the States.

Apple has more free cash than it knows what to do with, and buying Netflix would be a way for it to offload more than $250 billion in newly-repatriated earnings it's been holding overseas. "This is a good problem to have", Suva and Merchant said in their note. In the near future, however, Apple might spend a lot more on a major acquisition. The company is also working on its first scripted series with Jennifer Aniston and Reese Witherspoon. Apple also sells and offers rentals to consumers. If Apple were to do that, it would certainly be one of the largest deals we'll see in 2018 as the streaming service now has a market cap of $87 billion.

The other reason the analysts at Citi think Apple could target Netflix?

Wall Street Journal points out that HBO spent about $2 billion on content last year, while Amazon spent around $1 billion in 2013 alone, the year it started original programming.

  • Toni Ryan