But there's more than one way to absorb a company.
Dreaming up new ways to spend Apple's billions is a parlor game that never gets old. One well-trodden idea has surfaced again his fall—thanks largely to True Ventures' Om Malik. From a September post:
If [Apple] really wants to get into content and wants to make a strong statement to the Hollywood establishment that has stymied its television efforts so far, it should make a big, bold bet. It should use its massive stock market capitalization and cash hoard to buy Netflix.
Bernstein analyst Toni Sacconaghi begs to differ. He addressed the idea Wednesday in a note to clients that began like this:
We think buying Netflix to run exclusively on iOS and AppleTV is not a value-creating thesis and could not possibly justify a $50B price tag.
But there's more than one way to absorb a company. Sacconaghi breaks it down.
- Buy Netflix for Apple's exclusive use. That's not a value-creating thesis.
- Buy Netflix and run it as is, for all platforms. That's more plausible. It would bring in an extra $8 billion in revenues and would encourage Apple customers to become subscribers.
- Partner with Netflix. Sacconaghi likes this one best, seeing it as mutually beneficial. Apple gets the benefits of the Netflix service without the upfront risk; Netflix gets to grow its subscriber lists from Apple's high-value customer base.
Bottom line: The odds of Netflix getting gobbled up by Apple are too low, says Sacconaghi, to justify owning the stock.