Now that President Trump’s corporate tax cut has been passed there’s a big chance that Apple will buy Netflix. The tax cut will leave apple with a larger cash amount and give the company the opportunity to buy new businesses.
Because of the tax cut Apple will be able to bring most of its $252 billion in cash back to the US. Most of that money is in foreign jurisdictions.
“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,” say Citi analysts Jim Suva and Asiya Merchant.
Suva and Merchant sent out a note to clients in which they wrote up which companies Apple would be most likely to buy. At fist Disney was in their top two (with about a 20%-30% chance) but that was before Disney bought Fox’s studio and TV assets.
The reason Apple is looking to buy an entertainment company like Netflix is because they have been struggling to keep their iTunes viewers. iTunes started out as a big hit but most viewers have migrated to other services like Hulu, Netflix and Amazon. Apple’s expertise is developing high tech devices on which people can watch TV shows and movies, so with buying Netflix they will gain the knowledge of the streaming industry as well.