As some of you may be aware, Apple is currently sitting on a huge pile of cash, $252 billion to be exact. Despite having so much petty cash, Apple hasn’t spent a lot of money on acquisitions in the recent past. Last month, the Cupertino-based company shelled out just $400 million to acquire popular music…
As some of you may be aware, Apple is currently sitting on a huge pile of cash, $252 billion to be exact. Despite having so much petty cash, Apple hasn’t spent a lot of money on acquisitions in the recent past. Last month, the Cupertino-based company shelled out just $400 million to acquire popular music discovery app Shazam. In the near future, however, Apple might spend a lot more on a major acquisition. Thanks to the cut in corporate taxes as well as a one-time allowance for companies to bring back cash to the US from overseas while attracting much lower taxes than before. Citi analysts Jim Suva and Asiya Merchant suggest there is a 40% possibility of Apple acquiring Los Gatos-based entertainment company Netflix.
“The firm has too much cash – nearly $250 billion – growing at $50 billion a year. This is a good problem to have,” Suva and Merchant told clients. “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.”
Apart from Netflix, the analysts say there is a smaller chance (10%) of Apple looking at acquiring video game companies such as Activision, Electronic Arts, and Take-Two. Quite obviously, Apple stands to gain a lot more from acquiring Netflix than any of the three video game companies. While Apple does offer a vast catalogue of video and music content on iTunes, there is no denying the fact that streaming services such as Netflix are much more popular. Acquiring Netflix will help Apple gain a major lead over other major players in the fast-growing streaming service market. With over 110 million subscribers around the world, Netflix is the market leader in most major countries around the world. In the US, Netflix now has more subscribers than cable TV.
