By James DeRuvo (doddleNEWS)
With the passing of a new tax cut, corporations will be able to repatriate billions in revenue that they have stashed in banks all over the world. This is good news for Apple, which could take the opportunity to be go on a spending spree soon. With Disney taking a controlling interest in Hulu, could Apple gobble up Netflix to stay competitive? A team of Wall Street analysts believe there’s a good chance they will.
“(Apple) has too much cash – nearly $250 billion – growing at $50 billion a year. This is a good problem to have,” – Jim Suva and Asiya Merchant, Analysts for Citi
Part of the provisions of the recently passed tax cut legislation include a one time repatriation tax of about 10%, with which to bring cash stored overseas back into their coffers at home. That’s an opportunity for Apple to bring back home as much as $252 billion in cash. So why wouldn’t they want to have an eye towards using that windfall to make a huge investment?
Historically, Apple has been content to leave that growing pile of cash overseas to avoid high corporate taxes that have been the hallmark of the last few decades in the United States. But the new tax bill offers Cupertino a unique opportunity. “Tax reform may allow Apple to put this cash to use,” Suva and Merchant told clients in a conference call. “With over 90% of its cash sitting overseas, a one-time 10% repatriation tax would give Apple $220 billion for M&A or buybacks.”
So what could Apple buy with that cash burning a hole in Tim Cook’s pocket? Well, Suva and Merchant think that Netflix is a prime candidate. With Disney taking control of Hulu, a high profile acquisition would keep the computer company competitive in the streaming video market, and give their original programming a much needed wider audience.
There’s also a slightly less possibility, around 25%, that Apple could use their vast war chest to make a serious investment in Disney. Both Apple and Disney have been chummy since founder Steve Jobs sat on the board. Jobs also facilitated the acquisition of Pixar by Disney back in the 90s. Teaming up with the Mouse House could give Apple that streaming edge with Hulu.
But hold on. Disney already has their hands full with its takeover of 21st Century Fox, so it’s doubtful that CEO Bob Iger would entertain it. A marriage between Disney and Apple would also cause both to lose some of their iconic corporate identity, which in my mind makes that even more doubtful.
Buying Netflix, on the other hand, enables Apple to achieve many goals in a market category that they have struggled to gain share of, and with Apple willing to spend up to $5 billion this year on original programming, it could easily fill the void that is going to be left by Disney pulling their titles, which would include Marvel‘s Hell’s Kitchen Programming arc.
This isn’t a certainty mind you. Suva and Merchant believe there’s only a 40% probability that it could happen, but if Apple did, it would only cost them about a third of their war chest to pull it off. That’s walking around money for Cupertino.
Hat Tip – Business Insider