How to spend it: Apple edition

How to spend it: Apple edition

about 5 years ago1 min

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Every year, analysts get on Apple’s case: they see its record cash balance – currently $285 billion – note the company’s stated aim of growing its services business, and begin fantasizing about what M&A could help it get there… 🧠

This week, it was the turn of analysts at JPMorgan. They think Apple should buy Netflix… or Sonos… or maybe Activision Blizzard.

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In a Monday report, JPMorgan said Netflix would be a good strategic fit – matching sought-after content with Apple’s mobile expertise as more and more media is consumed on the go (we see you, zombie commuters 🤤). That said, Netflix's shares' 32% rise in the last year makes it an expensive acquisition at $153 billion – before any premium.

But there are other options, says JPMorgan. At just $1.3 billion, Sonos could also be a good fit to help boost Apple Music and its HomePod speaker. Or, for $36 billion, video game developer Activision Blizzard could help Apple capitalize on the shift to mobile gaming.

Games: definitely better than books...
Games: definitely better than books...

For Apple, large-scale M&A would be unprecedented – the company’s biggest acquisition to date was headphone brand Beats, bought for $3 billion in 2014. And a Netflix-sized deal might put an end to the $73 billion annual stock buybacks of which its investors are so fond 💸

A tie-up with Netflix could also make Apple a much riskier company, as it'd have to keep feeding Netflix’s hungry original content beast. Netflix will probably spend $15 billion on its programming in 2019; keeping this up would put increased pressure on Apple’s high-margin services business to deliver the cash it needs.

Let us know if you’d back such a deal – or whether it’s a channel-changer!

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