Corporate tax cuts approved last month by President Donald Trump will give Apple the financial firepower to make significant acquisitions, with a 40% likelihood that the iPhone maker will buy video streaming service Netflix, according to Citigroup stock analysts Jim Suva and Asiya Merchant. The analysts made the prediction in a December report, per Business Insider.
Apple attributed about $252.3 billion of its $268.9 billion in cash and marketable securities to foreign subsidiaries in Q3 2017. Like many multinational corporations, Apple avoided repatriating profits from outside the U.S. to avoid being taxed a second time. The Republican tax overhaul gives companies a one-time chance to pay a tax rate of 15.5% instead of 35% previously on profits returned to the U.S.
Citigroup’s Suva and Merchant ranked Netflix ahead of Disney, Electronic Arts, Activision, Take-Two, Tesla and Hulu among Apple’s potential acquisition targets. The analysts said Apple would only need a third of its overseas cash to buy Netflix, which has a market value of $83.1 billion.
Apple is among the technology companies that plan to spend billions of dollars on creating exclusive content to differentiate their services from rivals, especially as the market for mobile devices reaches saturation in developed economies. Amazon, Facebook, Google and Netflix are also in the market for original video programming.
A tie-up between Apple and Netflix would give the iPhone maker stronger reach among Netflix’s 109.3 million subscribers worldwide and a bigger content library, including popular original series like “Stranger Things” and “Fuller House.” Apple has struggled to offer compelling video content, even as iTunes revolutionized the music industry. Viewers have migrated to services like Netflix, Amazon or Hulu to watch shows.
Apple in November ordered two seasons of a scripted video series starring Jennifer Aniston and Reese Witherspoon that doesn’t have a launch date. Their star power will at least draw attention for Apple’s fledgling TV content offering. Apple also is reviving director Steven Spielberg’s anthology series “Amazing Stories,” which first aired on NBC from 1985 to 1987, per Variety.
Last month, Apple acquired music and image recognition app Shazam, showing how the company is open to acquiring outside expertise.