Apple looking to acquire?
On Friday, news regarding Apple and some big-name acquisition targets got the ball rolling on some rather tasty tie-ups on Wall Street. A Baird's analyst suggested that an acquisition of Tesla could get Apple's auto aspirations moving in the right direction, while purchasing Netflix would launch Apple into the streaming-video world. Buying Disney would spur its launch into content, TV, and a few other businesses as well.
While Baird likely published this note with a "fantasy M&A" outlook in mind, it does get investors thinking.
Unfortunately though, all of these potentials are quite unlikely. First, consider that Apple's largest acquisition came in 2014, when it purchased Beats Electronics for $3 billion. With no premium involved, it would cost the company $44 billion to acquire Tesla, $63 billion to buy Netflix, and a whopping $174 billion to purchase Disney.
Realism with Apple
It's unlikely that Apple could or would ever attempt to become Disney 2.0. The conglomerate has spent decades getting to where it is today and no amount of money is likely to replicate the Disney brand. It also doesn't seem worthwhile for Apple to try and become an automaker. When it comes to the Netflix business though, that seems like the most viable option for Apple.
The reason is simple: Products.
Apple has already sold more than 1 billion iPhones, and while a number of these aren't in use today, there are still hundreds of millions of active devices. There are also hundreds of millions of iTunes accounts. Apple has the delivery method in place through its various products, it just needs the platform.
Put simply: Apple could either buy Netflix or go at it a different way.
In that case, Apple will likely go at it in a different way. First, consider that Apple had the opportunity to buy Netflix when the stock crashed from $40 per share to $10 in 2011. That would have been a good time to crack open its wallet, but the tech giant took a pass.
Next, look at its Apple Music business. Instead of buying Pandora or Spotify, Apple chose to go out and develop its own platform. Admittedly, when it purchased Beats -- better known for its headphones -- it did have a music service as well.
Of the streaming and video companies out there, we already know YouTube (owned by Google) isn't going anywhere, and with Netflix seemingly off the table, that doesn't leave too many options. Hulu is one, which is owned by Disney, Fox, Comcast and Time Warner. The owners tried to sell Hulu just a few years ago, only to pull it off the selling block and inject it with more cash. Hulu is still growing, but it is certainly no Netflix. Given that Hulu is currently owned by a number of large content providers doesn't make it clear whether that's a good or bad thing for Apple.
Seemingly though, this could be viewed as a positive for Apple if executed upon correctly, as it could make landing content deals a bit easier.
Apple's other potential target?
What if Apple also started snooping around for content, perhaps with an interest in Vice Media. Vice recently fetched a valuation of $4.5 billion, while Hulu was recently valued at $5.8 billion. Somewhere between $13 billion and $15 billion would likely net Apple both properties. As a result, Apple gets a high quality streaming company and a high quality media company. The two properties overlap and can make Hulu more attractive to users, especially if Apple began pushing the platform onto its hundreds of millions of users.
Netflix seems like the most realistic acquisition from Baird's list. That said, buying Netflix seems quite unrealistic for Apple. Rather than buying Netflix, Apple could purchase both Hulu and Vice for roughly one-fifth the cost and get a formidable platform to build out going forward -- perhaps adding live events, premium content, and/or sports. While management may not take this route, it seems like a more realistic outcome for Apple.
