Does it make sense for Apple to buy Netflix?

Apple CEO Tim Cook and Netflix CEO Reed Hastings.   Getty  BI illustration

"The firm has too much cash - almost $250 billion - growing at $50 billion a year", said Citi analysts Jim Suva and Asiya Merchant.

"The firm has too much cash - almost $250 billion - growing at $50 billion a year".

Now, The US President's corporate tax cut has been passed and given companies a onetime allowance to repatriate cash stored oversees without a major tax hit. As such, tax reform may allow Apple to put this cash to use. For Apple, that's about $220 billion - only a third of which is required to acquire Netflix. The analysts said there is a 20 - 30 percent chance of an even bigger deal between Disney and Apple, but the report was written before the Disney/Fox acquisition.

Suva and Merchant ranked potential Apple M&A targets in a note to clients sent in December.

Netflix, which has market capitalization of more than $85 billion, is listed as the company most likely to be acquired by Apple.

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. Thanks to the cut in corporate taxes as well as a one-time allowance for companies to bring back cash to the USA from overseas while attracting much lower taxes than before.

While Apple dominates the smartphone sector across the world today, the same can't be said for its streaming market share. Now that we know that such a deal can happen, the question is, will it?

Apple's struggle to establish itself as a key player in internet broadcasting, despite launching Apple TV and working on numerous TV shows, is well documented.

Apple also recently dipped a toe into content creation, with a Jennifer Aniston and Reese Witherspoon-starrer video series. Or less than half sure that Apple will, in fact, acquire Netflix.

Apple has been trying to get hold of providing a compelling television or movie service for years now. Heads turned when Netflix announced that it would devote $7 billion to $8 billion to content in 2018, but it might still be shocking to hear that Netflix is going to release 80 original movies in 2018. Nollen believes Netflix can save money by spending less on licensed content.

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