Apple is sitting with a vault so full of money that even Scrooge McDuck
is jealous. Every now and then, Apple uses some of this money to make a
small acquisition. For example, the company recently took $400 million out of petty cash to buy music discovery app Shazam.
The largest acquisition that Apple has made by itself is the $3 billion
it spent to purchase Beats Audio. But if a pair of Citi analysts are
correct, there is a chance that Apple will top that record by a factor
of approximately 34.
According to Citi analysts Jim Suva and
Asiya Merchant, there is a 40% possibility that Apple will buy streaming
video content provider Netflix. The latter currently has a market
capitalization in excess of $80 billion. Add on a 30% premium and you’re
talking about a $104 billion purchase. Before Disney’s bid for Fox, the
two analysts gave an Apple-Disney combination a 20% to 30% chance of
happening. The analysts say that a Disney deal would have a larger
impact on Apple’s stock price (20%) than a Netflix acquisition would
The duo also say that there is only a slim 10% chance that
Apple will go after game producers Electronic Arts, Take-Two and
While Apple has $252 billion hoarded away (90% of it
held overseas), the Trump tax cut will allow the company to repatriate
these holdings while taking a small tax hit. This will allow Apple to
make a large purchase for a company like Netflix.
Now that we
know that such a deal can happen, the question is, will it? Apple has
started creating original content for Apple TV, partnering with Jennifer
Aniston and Reese Witherspoon on a new show. And Netflix has found that
it can get subscribers to pay it for original shows. So perhaps there
is something to an Apple acquisition of Netflix. The major downside for
Apple stockholders is that depending on how such a deal is structured,
it would most likely lead to a decline in Apple’s high-flying stock in
the short term. That would interrupt Apple’s opportunity to be the first
company with a one trillion dollar valuation.