According to Business Insider and numerous other media outlets, Citi analyst Jim Suva argued this week that there is a 40% probability of Apple buying Netflix, thanks in part to President Trump's corporate tax cut.
After taxes, Apple would bring roughly $220 billion, with that sum growing about $50 billion each year. "This is a good problem to have", Suva and Merchant were quoted as saying. The tax cut paves the way for Apple to bring its massive pile of cash stored in foreign jurisdictions to the United States. "With over 90 percent of its cash sitting overseas, a one-time 10 percent repatriation tax would give Apple $220 billion for mergers and acquisitions (M&A) or buybacks". While there's no signs of Apple discontinuing its smartphone, new reports suggest the Cupertino-based company may purchase the streaming TV and movie provider Netflix. Tesla is listed at around 5% likelihood.
Suva and Merchant pointed out that Apple could acquire Netflix for only one-third of that amount.
If Apple were to buy Netflix it could spark a tech giant arms race, with the likes of Amazon and Google both looking for ways to shore up Amazon Prime Video and YouTube repetitively to fend off any extra competition Netflix can levy with Apple's help and the iOS ecosystem.
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A tie-up between Apple and Netflix would give the iPhone maker stronger reach among Netflix's 109.3 million subscribers worldwide and a bigger content library, including popular original series like "Stranger Things" and "Fuller House".
While nothing is set in stone, Apple may be making one of its highest profile acquisitions in the new year, at least according to two Citibank analysts.
Apple (NASDAQ: AAPL) has been struggling from many years to offer compelling video contents to viewers. Apple wants to change that and is already working on creating more original shows.
Nollen predicted that Netflix will increase original content from 25 percent in 2017 to 60 percent in 2020.