Microsoft Could Be Eyeing Netflix as Its Next Big Purchase

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Image: Netflix

A new rumor is suggesting that Microsoft could be eyeing Netflix as a potential purchase to expand its portfolio. Reuters reports that the two already share a number of common ground with Microsoft President Brad Smith already a part of Netflix’s board along with Microsoft using the streaming company as its advertising partner.

Microsoft is currently embroiled in its attempt to buy out Activision Blizzard, a move that is experiencing increasingly more legal challenges following lawsuits from the FTC and a small group of individuals. It has even offered concessions to the EU should it allow the deal to pass. Although Microsoft could be eyeing Netflix it is unlikely to pursue this path but both companies also share in providing game streaming services which could potentially benefit from a merger. Meanwhile, Microsoft has a substantial market value that is thirteen times larger than Netflix’s giving it plenty of resources for this potential purchase but profitability for such a purchase may not yield adequate returns.

“With a market value 13 times that of Netflix, as of early December, $1.8 trillion Microsoft can afford Netflix. A 30% premium would value the Netflix enterprise at nearly $190 billion. Significant cost savings would be hard to find, however. And after taxing the $8 billion of operating profit that analysts project for Netflix in 2024, the implied return on investment would only be half its 8% weighted average cost of capital, per Morningstar analysts.”

Microsoft CEO Satya Nadella

Reuters notes this is part of its breaking views for 2023 but also that Microsoft CEO Satya Nadella has a reputation for looking at big strategic maneuvers in expanding the company. From spending $2.5 billion to acquire the company behind Minecraft and then $26 billion for LinkedIn, to $20 billion for Nuance, the CEO is not afraid to take risks and spend big.

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Peter Brosdahl
As a child of the 70’s I was part of the many who became enthralled by the video arcade invasion of the 1980’s. Saving money from various odd jobs I purchased my first computer from a friend of my dad, a used Atari 400, around 1982. Eventually it would end up being a lifelong passion of upgrading and modifying equipment that, of course, led into a career in IT support.

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