Apple Could Soon Be Making A Bid To Buy Netflix
Netflix and chill? Yeah, we've all heard of it, and had to patiently explain to unsuspecting relatives that it doesn't technically mean what it sounds like. But with the company behind the iPhone rumoured to be making a bid for everyone's favourite streaming service, could 'Apple and chill' be about to catch on?
While no bid has been confirmed yet, Citi analysts Jim Suva and Asiya Merchant believe that there's a 40 percent chance of Apple trying to buy the streaming service, and it's all thanks to the US government's planned corporate tax cut.
The tax cut planned by Donald Trump's administration will not only lower tax rates but also will allow Apple's $252 billion (£185bn) of overseas cash to be brought back to the US without a big tax hit. This means that the tech giant will have more money to burn, the financial service analysts said.
"The firm has too much cash - nearly $250bn - growing at $50bn (£37bn) a year. This is a good problem to have," Suva and Merchant told clients in a note last month.
"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 percent of its cash sitting overseas, a one-time 10 percent repatriation tax would give Apple $220bn (£162bn) for M&A [mergers and acquisitions] or buybacks."
In a graph the analysts ranked the companies Apple is most likely to buy with its newly available dosh, putting Netflix top at the list with a 40 percent chance.
Second to Netflix was Disney with a 20-30 percent chance (until it bought 21st Century Fox), with other possible targets including gaming firms Electronic Arts, Activision, and Take-Two (10 percent), and Elon Musk's Tesla (five percent).
Apple's long been trying to grow its own TV business, having pioneered online video streaming with iTunes and recently launching its first set of original TV shows.
However, it has struggled to keep pace with new subscription-based services like Netflix, Hulu, and Amazon Prime, so you can see why Netflix would be a target for the tech giant.
Apple's known for cautiously buying start-ups, but may decide to take a risk on Netflix when it has more weight to throw around. After all, Netflix has exploded over the past decade, boasting 100 million subscribers worldwide and spending billions on its original shows. It would be an easy win, right?
But while the analysts said Apple would only need $75bn (£55bn) to buy Netflix, Apple's largest ever acquisition is still Beats for $3bn (£2.2bn) in 2014. Buying Netflix - a company Apple's spent a bomb competing against - would be a big jump.
Then again, as the saying goes: if you can't beat 'em, buy 'em.
Featured Image Credit: PA