
Citi lists Netflix, Tesla as potential takeover targets for Apple - mrosenfield
http://www.reuters.com/article/us-apple-research-idUSKBN1811LX
======
cwyers
This is so, so dumb. The cash hoard is going to sit overseas where it has
until the tax situation changes. Apple will continue to take over companies
that help it control its supply chain, which are mostly companies you haven't
heard of, and not do any of these big acquisitions that Wall Street loves to
speculate about (a month or so ago it was Disney) but that Apple has never
done.

~~~
runako
I keep hearing this argument that companies won't repatriate offshore cash
until they can do so at an arbitrarily low tax rate. What I don't understand
is why they wouldn't continue to do what they have been doing:

\- borrow in the US, potentially by issuing low-rate bonds \- use the cash to
fund dividends or acquisitions \- OR using stock to fund acquisitions

It seems this gameplan would hold up until effective interest rates on blue-
chip corporate debt are higher than the proposed repatriation tax. Apple
offered 3.25% on its most recent bond issue, so it would seem that a 10% tax
on repatriation would not be attractive.

What am I missing?

~~~
djrogers
3.25% is the annual interest rate, it compounds and will cost considerably
more than a one-time 10% tax would.

~~~
ryanwaggoner
But surely much of that overseas cash is invested and earning enough that
3.25% interest is erased or at least mostly offset?

~~~
colefichter
Doesn't the word "cash" imply that the money is not invested? If they bought
factories or something else productive, we'd usually refer to that as
"capital".

~~~
runako
IIRC the term is typically "cash and equivalents." [1] There is definitely not
the expectation that Apple has $200B+ sitting in checking accounts unable to
earn any interest.

Treasuries and certain other government securities count as "cash" in most
cases.

Edit: Apple reports most of the amount bandied about as their "cash" as being
in "long-term marketable securities." [2]. So it's a mix that is definitely
not designed to all be instantly convertible to USD with no penalty. I'd guess
most other large companies manage their cash similarly.

1 -
[https://en.wikipedia.org/wiki/Cash_and_cash_equivalents#Comp...](https://en.wikipedia.org/wiki/Cash_and_cash_equivalents#Components_of_cash_equivalents)

2 -
[https://www.apple.com/newsroom/pdfs/Q2FY17ConsolidatedFinanc...](https://www.apple.com/newsroom/pdfs/Q2FY17ConsolidatedFinancialStatements.pdf)

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li4ick
"They have hired people we've fired," Musk said. "We always jokingly call
Apple the 'Tesla Graveyard.' If you don't make it at Tesla, you go work at
Apple. I'm not kidding."

Yeah, not a chance.

~~~
arcanus
huh, why not? "If you can't beat 'em, buy 'em!"

Only way I can see this getting stopped would be if Musk used his poison pill:
threatening to leave if they were acquired.

~~~
ajmurmann
Totally insane scenario: Apple buys Tesla and Musk runs both. Right now
sentiment towards Cook send too positive for this scenario, but as a Apple
shareholder I'd like that scenario.

~~~
jjtheblunt
Except Tesla is not profitable and is heavily in debt, Musk regularly
proclaims nonsense to manipulate sources of funding, while Apple is more
honest, by far.

~~~
sidcool
Source?

~~~
wlfmn
Not the original poster, but i'm guessing they are referring to Tesla
including resale price guarantee in sale revenue numbers [1].

You can check out their SEC submissions as well, it's all public. [2]

1\. [http://www.investopedia.com/news/will-tesla-make-
profit-2017...](http://www.investopedia.com/news/will-tesla-make-
profit-2017-tsla/)

2\. [https://www.sec.gov/cgi-bin/browse-
edgar?action=getcompany&C...](https://www.sec.gov/cgi-bin/browse-
edgar?action=getcompany&CIK=0001318605&owner=exclude&count=40&hidefilings=0)

------
gremlinsinc
Pretty sure you'd have to steal tesla, spacex, etc from Elon's cold dead hands
-- he's too attached to the companies at a core emotional level. There's no
way he just decides..think I'm gonna sell Tesla today...if the price is
right...

~~~
Spooky23
What's Tesla's real endgame?

There are literally dozens of car companies, who are figuring out how to make
electrics. The Tesla value is largely in the brand.

~~~
RKoutnik
> What's Tesla's real endgame?

Batteries. If no one buys Tesla cars but all the car makers buy Tesla
batteries, Tesla still wins. Gigafactory 1 at full production will be making
about as many batteries as the entire planet produced in 2016. They're already
working on Gigafactory 2. This is why they released all their patents - Tesla
wins if electric cars win in general. Doesn't need to be Tesla cars.

(Disclaimer: I own a moderate amount of TSLA, specifically because I think
investors missed this point)

~~~
_pmf_
Daimler held a significant amount of Tesla stock for this reason, but dropped
it when they discovered that there's no magic behind the smoke and mirrors.

------
MS_Buys_Upvotes
> Citigroup analyst Jim Suva said in a note to clients.

One bozo sends out an e-mail and it's news?

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FLUX-YOU
This is not even an article and no explanation is given as to why Apple would
specifically consider these companies other than an analyst having 3/5 stars.

~~~
antr
I've just read the report, its +20 pages long, and there is a reasoning by the
equity analyst in using the mentioned companies. It does also mentioned other
companies not mentioned in the article. This article is just clickbait, and
this type of reports are produced every day by dozens of research analysts.

FYI, here is a screenshot of the seven target companies mentioned, as well as
the impact these will have in Apple's revenue and EPS growth:
[https://cl.ly/0P1m0E2f043B](https://cl.ly/0P1m0E2f043B)

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tdburn
Netflix makes the most sense. Apple is pretty weak with content.

Would Tesla thrive under apple with Musk as the visionary?

Hulu sounds like a terrible idea

~~~
ProAm
Please no. Apple will ruin Netflix.

~~~
zeveb
As a Netflix customer and happy Apple non-customer, I'm scared to death of
Apple buying Netflix. So much for openness and competition! So much for cross-
platform support! And the worst thing is, the great mass of Apple ecosystem
inhabitants wouldn't even see the problem.

~~~
johneth
You realise that Apple Music is also available on a competing platform
(Android)? Netflix's success is, in large part, because of it's ubiquity in
the platforms where it's available. _If_ Apple ever bought Netflix, I doubt
they'd remove it from other platforms.

~~~
lowtolerance
Apple Music is available on Android _and_ Windows.

It would make absolutely no sense for them to buy Netflix only to cut out the
vast majority of Netflix users by making it only available on Apple's own
platforms.

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Analemma_
I don't think he has an accompanying article I can point to, but there was an
episode of Exponent where Ben Thompson discussed the possibility of these
giant Apple purchases (and did specifically discuss both Netflix and Tesla).
He made a point that is often underappreciated given how obviously true it is:
that, with rare exceptions, huge cross-sector corporate takeovers/mergers
almost never work. They entice the imagination, which is why both analysts and
the general public are always speculating about them, but from a business
perspective it's almost never a good idea.

Apple seems to understand this pretty well: they make small, smart buys (as
opposed to, say, Microsoft or even Google, who have a history of big purchases
that didn't deliver), so I doubt they'll start considering takeovers like
this.

~~~
throwaway40483
Yeah. Their biggest purchase is Beats at $3B, which is astonishing low for a
corporate giant like Apple. I'm not sure whether this is due to prudence or
just NIH syndrome.

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richardwhiuk
Video game developers? Is there any logic or rationale here? This seems vapid
speculation at best.

~~~
freehunter
Gaming on the iPad or iPhone or Apple TV are big money makers.

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heavymark
As much as I'd love them to buy Netflix, people have been saying it for years
and still doesn't seem to make sense, since in general Apple get's everything
it needs from Netflix through AppleTV. Owning it wouldn't greatly increase
their profits vs the cost to get it. More importantly, when its time to renew
all the shows, all the major networks could simply increase all there rates
knowing Apple can afford it. Yes, Netflix has a lot more original content now,
but even that may suffer with a company at the helm.

For Tesla, Apple can build their own car if they won't but it sounds like they
have decided against that and instead will focus on building the intelligence
of the cars and then sell that to all the car manufactures through licensing
which is much more lucrative based on the effort involved.

Instead Apple will continue to focus on smaller companies to gain more control
over their supply chain and the companies that they have to pay licenses to.
That is guaranteed savings in the long run vs something like Netflix which
could devalue itself with a new owner.

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squozzer
Why not a telco/cableco, especially if FCC reverses Net Neutrality?

Apple is not really in the service business a la Google, Facebook, Netflix, or
Amazon, but they could tap into the rents the last-milers will be seeking --
and probably getting -- from the big boys/girls once NN is history.

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chillydawg
Best thing to do is give it back to the owners of that cash: the shareholders.
Let them decide.

~~~
Moto7451
Doing so would incur a large tax liability when transferring the funds back to
the US. The reason Apple has been taking out bonds in the US instead of
repatriating the overseas cash reserves is because it's cheaper to do the
former to pay a dividend or perform a share buyback.

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twothamendment
An Apple owned Netflix scares me. I like the products I use and Apple tends to
be a little more of a closed ecosystem. I'd hate to see how well (or not well)
Apple would support the streaming or offline options that currently exist.

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giarc
This will sound pretty fan boy, but I think it's pretty obvious Musk isn't in
this for the exit money and he believe he can build Tesla up to be a great
company. He likely doesn't see much value add by being acquired.

~~~
boznz
That exit money put into SpaceX would totally fund his space plans though

~~~
giarc
He doesn't seem to have much problem attracting investment. He had thousands
of people willing to put down $1000 toward a car that was years away from
being made available.

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seeingfurther
Buy Tesla. Groom Musk for CEO of Apple.

~~~
orcasauce
I think he's more interested in fixing the world, not just changing it.

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kchoudhu
It's also Citi saying this, so you can ignore pretty much anything and
everything they say.

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eip
I don't care about Tesla but please don't shit on Netflix.

[http://imgur.com/gallery/NnYOrNd](http://imgur.com/gallery/NnYOrNd)

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viggity
oh fuck. please. no. no. no. Apple locks things down, gives you few choices,
few integration points.

I love the direction that Microsoft is headed (and they likewise are sitting
on a mountain of cash). For developers they're executing extremely well. But
their overall ability to execute a unified vision is kinda bad (in practice it
is really a conglomerate of a bunch of huge businesses that don't always get
along).

In short. Please just let these awesome companies continue to be awesome.

~~~
usaphp
What integration points does Tesla offers you that apple does not?

~~~
garraeth
I'm no expert, but would such an acquisition stop any patent giveaways?

[https://www.tesla.com/blog/all-our-patent-are-belong-
you](https://www.tesla.com/blog/all-our-patent-are-belong-you)

