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Neither Apple Nor Microsoft Are Buying Netflix

By Rick Munarriz - Apr 3, 2013 at 5:00PM

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Let's nip Jim Cramer's dream in the bud: Netflix isn't going to one of the tech giants.

Netflix (NFLX 2.39%) would apparently look good on the arm of Apple (AAPL -0.76%) or Microsoft (MSFT -0.31%).

Jim Cramer played up the video service as a potential acquisition target on CNBC's Mad Money show on Monday night.

However, instead of going the more common (AMZN 2.03%) route, Cramer only singled out Apple and Microsoft as logical buyers.

Tying the knot with Netflix
Apple, according to Cramer, "needs a mobile content offering as well as something proprietary to run on Apple TV."

He also suggests that Apple needs to make a meaty acquisition to wake up its freefalling shares: "How do we reverse that? Netflix!"

Cramer also argues that Microsoft should bid $13 billion for Netflix, a 30% premium to where it is now.

"Don't rule it out," he argues. "Why should this monster stay independent with its 27 million subscribers and Steve Ballmer desperate to leave a legacy?"

Both possibilities make sense, but they seem flawed after thinking them through.

Apple is being widely criticized for stashing $137 billion in cash as growth prospects peel away. The theory that the iEverything titan needs something proprietary for Apple TV isn't necessarily a good reason to buy Netflix. If the plan is to tie Netflix only to Apple TV owners, it would be merely keeping a Ferrari in the garage. Netflix's global appeal is easy accessibility, and that means not tethering it to any particular platform. Anything that would limit Netflix's subscriber count would also limit its ability to pay for content.

Microsoft makes more sense, especially since it was pretty suspicious when Netflix CEO Reed Hastings stepped down from Microsoft's board last year. There must have been something there.

However, the notion that Microsoft can sweep Netflix away for $13 billion is poorly conceived. A year ago, Netflix could've been had for half that price. Its stock was out of favor. Now that analysts are jacking up targets and subscribers are topping 33 million globally, do you really think Netflix and its shareholders will consider an exit strategy?

Apple, Microsoft, and Amazon could've probably had Netflix at the nadir of the Qwikster fiasco. They would have been welcomed as saviors.

They would've gotten a great price. Apple would make sure that the iOS Netflix app would be the best. Amazon could retire its less popular Amazon Prime streaming offering. Microsoft could've kept a cool toy from its rivals, making it the cornerstone of the new Xbox experience.

However, it's too late to buy Netflix. The only ones buying Netflix now are tomorrow's investors.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$139.29 (-0.76%) $-1.07
Netflix, Inc. Stock Quote
Netflix, Inc.
$184.65 (2.39%) $4.31
Microsoft Corporation Stock Quote
Microsoft Corporation
$258.81 (-0.31%) $0.81, Inc. Stock Quote, Inc.
$2,124.19 (2.03%) $42.19

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