The tech giant Apple has too much cash. Apple’s cash on hand is about $250 billion and growing at the rate of $50 billion annually. Last year, Congress finally passed the Tax Cuts and Jobs Act of 2017, which would make it affordable for Apple to repatriate the $252.3B cash it currently holds overseas. Apple would be able to take advantage of a one-time tax break, paying just 15.5% tax on the cash, rather than the 35% it would have had to pay previously. So the question is, what is Apple going to do with the money? Recent reports indicated that there is a high likelihood that Apple could purchase Netflix, along with other entertainment companies with their repatriated cash.
According to other report from VentureBeat, there is a 40 percent chance that Apple would use the $250 billion repatriated cash to acquire Netflix. Other possibility is Disney in the list of likely acquisition candidates. The list also includes Tesla, Hulu, Activision, Electronic Arts, and Take-Two. In a note to clients in December, Citi analysts Jim Suva and Asiya Merchant offered a list of companies that Apple could possibly acquire if it decides to take advantage of the U.S. government’s tax reform package. “The firm has too much cash – nearly $250 billion – growing at $50 billion a year. This is a good problem to have,” wrote the analysts. “Historically, Apple has avoided repatriating cash to the US to avoid high taxation. As such, tax reform may allow Apple to put this cash to use.”
What makes Netflix a potential acquisition target for Apple is because video is becoming increasingly important to tech giant. There were rumors back in November 2017 that Apple was planning to launch a streaming service and compete with Netflix. In another report last year, CNBC said, “Apple could launch a video subscription product next year, while Netflix could be forced to introduce new pricing plans, one analyst firm has predicted. Tech analysts at CCS Insight released their 12th annual set of predictions about the industry on Wednesday.” The logic is, instead of launching its own streaming service or competing with with Netflix, Apple could just buy Netflix with large customer base while taking advantage of one-time tax break. It remains to be seen what Apple would do. We will continue to monitor this story.