Citi analysts Jim Suva and Asiya Merchant believe that there’s a 40 percent chance that Apple might end up buying Netflix. They feel this way now that U.S. President Donald Trump’s corporate tax cut has been passed. The tax cut paves the way for Apple to bring its massive pile of cash stored in foreign jurisdictions to the United States. The repatriated cash can then be used for stock buybacks and acquisitions.
The corporate tax cut is accompanied by a one-time allowance to repatriate cash stored overseas without a major tax liability. Apple has long avoided repatriating cash to the United States in order to avoid high taxation. This tax reform might entice Apple to bring the money to the United States by paying a one-time 10 percent repatriation tax.
Apple is sitting on more than $252 billion in cash and almost 90 percent of it is parked outside the United States. Even after the repatriation tax, it would have over $220 billion at home to fund mergers and acquisitions as well as stock buybacks.
The analysts say that Apple is only going to need a third of that cash to fund its purchase of Netflix. While all of it makes sense on paper, there’s nothing to suggest that Apple has even considered the idea, let alone explored the option in discussions with Netflix.
It doesn’t feel impossible, though. Apple has been trying to establish its footing in the online video streaming space. Acquiring Netflix will instantly give it a dominant position in the market.