Netflix Can Afford to Say No

Like a good friend whom everyone is trying to fix up, matchmakers are whispering around Netflix (Nasdaq: NFLX  ) again.

The Barron's Tech Trader blog column is crediting TheFlyOnTheWall.com for a rumor this morning, indicating that Netflix is a hot buyout candidate.

But the news doesn't make any sense. The chatter seemed plausible a couple of years ago, when Netflix was threatened by a hungry, price-slashing Blockbuster (NYSE: BBI  ) and fears of irrelevance in a digitally delivered future.

Since then, Netflix has emerged victorious on both fronts. Blockbuster's cash crunch forced it to back away from cutthroat subscriptions. Netflix's streaming service, available at no additional costs for members on unlimited DVD plans, is a hit.

Things are going so well with Netflix that it was one of the few consumer-facing stocks to close 2008 higher than when it started. With 10.3 million members in its latest quarter, Netflix is growing its user base at a time when other premium entertainment providers, including Sirius XM Radio (Nasdaq: SIRI  ) and DISH Network (Nasdaq: DISH  ) , are shedding subscribers.

In short, Netflix is no longer desperate. It's also no longer cheap, and it's left with little reason to cash out as its coffers and rolls continue to grow.

And who would buy Netflix, anyway? Amazon.com (Nasdaq: AMZN  ) and Microsoft (Nasdaq: MSFT  ) are the two obvious sugar daddies, but neither one makes sense at this point.

Amazon is booting affiliates from North Carolina, Rhode Island, and Hawaii because it doesn't want to have a presence in states that would force it to collect sales tax. How silly would Amazon be, then, to tack on Netflix's network of dozens of distribution centers?

Microsoft is still licking its wounds after chasing an out-of-favor Yahoo! (Nasdaq: YHOO  ) last year. Even if Netflix CEO Reed Hastings sits on Microsoft's board, it doesn't make sense for Mr. Softy to pursue a company that is organically popular. Netflix investors would demand a hefty premium. Oh, and let's not forget that regulators are critical of anything that the folks in Redmond want to ingest.

So let this rumor die a respectful death. It no longer makes dollars or sense.

Other Netflix-ish headlines:

Amazon.com and Netflix are Motley Fool Stock Advisor selections. Microsoft is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz has been a Netflix shareholder -- and subscriber -- since 2002. He owns no shares in any other companies in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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  • Report this Comment On July 13, 2009, at 5:11 PM, BigVincent wrote:

    Rick i can't believe i am waisting my time to quote your garbage.

    "Things are going so well with Netflix that it was one of the few consumer-facing stocks to close 2008 higher than when it started."

    "With 10.3 million members in its latest quarter, Netflix is growing its user base at a time when other premium entertainment providers, including Sirius XM Radio (Nasdaq: SIRI) and DISH Network (Nasdaq: DISH), are shedding subscribers."

    sirius satellite radio in 2008, Q4 closed higher subscriptions while net flix was adding subscribers, it still didn't add subscribers at a rate that was as fast as sirius. You are some what correct with the garbage that you spew from your text with that dish network was losing subscribers in the 4th quarter last year. But hell why do you mention sirius/xm? why don't you mention cable company comcast, or charter communications that went bankrupt? Why satellite radio? How does it even compare to a movie subscription company that goes through churn at a faster rate than satellite radio, or or television media in general.

    I hope that yahoo finance wipes all your articles from there blogs. Your articles are truly garbage.

    Are you joking?

  • Report this Comment On July 13, 2009, at 6:42 PM, TMFBreakerRick wrote:

    Vincent, you know I do look forward to your feedback, but I think you missed the point. The first comment refers to the STOCK. Netflix is one of the few consumer-facing stocks to have a positive run in 2008. Sirius XM, obviously, did not.

    The 10.3 million subs is in Q1, a quater in which both Sirius XM Radio and DISH lost subscribers. Not all entertainment subscription services lost ground. DirecTV gained subscribers. Netflix, of course did, and it's why I singled out two of the companies with the largest subscriber bases that took a step back in Q1.

  • Report this Comment On July 13, 2009, at 7:26 PM, yahoomania wrote:

    Hey Rick, do you EVER write an article that DOESN'T bash SiriusXM? I think you should be investigated.

  • Report this Comment On July 13, 2009, at 8:54 PM, BigVincent wrote:

    Rick your singling out a company that has one of the highest market caps and is a penny stock. It's dilution is horrendous, let this company get some fresh air for a moment instead of comparing it to smaller cap high yeild growth stocks. Sirius will have it's day but it's not even comparable to dish networks market cap or growth, why you paired it up to dish network which is on a different trading field beats the hell out of me.

    Your comparing fruits to vegetables. There not the same but you will still get your nutritional value. The case of dish network to sirius does not have the same value, do not have the same capitalization, and do not share the same type of media platform, satellite radio is getting beat up in the radio sector where all of terrestrial radio is failing, that will all change. But to compare it in a sector that it doesn't have to perform against isn't a fair analysis of the company.

    Sure point taken your just providing a scenario. It's the wrong scenario to represent.

    Anything mentioned of satellite radio is going to be a negative spin until the debt is paid, or the churn of subs is reduced, either or that's the way it is. There are worse companies out there with high market cap and ride higher than a buck per share you could of represented instead of satellite radio.

    Give it a rest man. After a while people will assume your a tool like Ryan Secrest putting spins on thins that don't need to be spun or hyped up. I've enjoyed your columns for there entertainment value, this is simply not entertaining anymore.

  • Report this Comment On July 13, 2009, at 10:00 PM, ReadEmAnWeep wrote:

    "Rick i can't believe i am waisting my time to quote your garbage."

    Man it is funny how rude people can be on here. Guess it is just because they are "anonymous". Btw, this guy should read "How to win friends and influence people" because he doesn't know how to make a point and have people want to listen.

  • Report this Comment On July 23, 2009, at 3:55 PM, raider1234 wrote:

    Netflix may be able to play this game for only so long, after that point once their user base starts to age and retire, it will peak out. They simply cannot win against the future which includes better quality free streaming video, faster broadband and of course p2p.

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