Netflix, Inc.(NASDAQ:NFLX) shares went up over13%
to $69.58 in Friday’s session due to rumors running rife that Microsoft is
thinking of acquiring the company. The timing is apt for speculations because
attention spans are short and trading volume is thin.
One theory is that the above rumor is linked to
the fact that Netflix CEO Reed Hastings will not be a part of Microsoft’s board
of directors. This makes sense if the acquisition is actually going to take
place, because that would make Reed’s departure more fitting. However, Reed may
have stepped down for reasons of his own.
The market cap of Netflix is a mere $3.7 billion
and the stock trades at approximately half of its 52-week high. In spite of
fierce competition, Netflix still retains its unique brand presence when it
comes to streaming video and widespread distribution on platforms like
smartphones, tablets, PCs, TVs, Blu-Ray players etc. Microsoft could pay 2
times the present market cap and utilize less than 10% of the cash, due to having
469 billion in cash and investments, even though a major part of that money is
outside of the U.S. and off-limits for acquisitions in the country.
Microsoft has recently made additions to the Xbox
360, turning it into an entertainment device rather it remaining just a video
game console. The company has always been interested in Web brands – it tried
to purchase Yahoo a few years back and spent $8.5 billion for Skype. These
factors have somewhat added fuel to the fire about the impending acquisition.
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