E Why Apple Won’t Buy Netflix, Disney Or Twitter

As I peruse the comment boards of sites like SA, The Motley Fool and The Street, I see several comments that I’m not sure to laugh at or take as a sign of the writer’s insanity.

The latest I saw was: “On a scale of 1 to 10, what is the possibility of Apple buying Netflix?” Quick answer to this question and any other in regards to Apple buying Disney, Twitter or any other massive tech firm: “I know it’s not on your scale, but zero.” And I’m going to tell you why.

It’s definitely not because Apple wouldn’t be able to if the opportunity presented itself. The company has more than $21 billion and the structure needed to do it if its cash hoarde wasn’t enough on its own.

Netflix

This one is a no-brainer for some. After all, there have been on-again, off-again rumors about Apple having its own subscription-only TV streaming service. But why wouldn’t Apple be considering buying its main competition rather than trying to overcome it.

Let’s talk about valuation. Netflix’s current market cap is a little more than $49 billion. That’s good for a forward price-to-earnings ratio of 466. While some investors may be able to justify buying at that kind of valuation, there’s no way a company like Apple would do it.

Disney

Probably the silliest of the recommendations I’ve heard, the person I chatted with about this told me that as long as the offer was good enough, Disney would have to sell to keep shareholders happy. The only problem with that is it’s not true at all.

The two companies have nothing in common. What Disney sells has nothing to do with what Apple sells. The two companies are in completely different life stages, so to speak, with completely different goals. What would be the point? Yes, I know the two companies have had good relations over the years. Disney bought Pixar, the company Steve Jobs helped fund. When the acquisition went through, Jobs became the largest individual shareholder of Disney and earned a seat on its board of directors. But ultimately, this means nothing beyond Jobs’s involvement in the company. Even if Apple wanted to buy Disney, there’s no way Disney shareholders would agree to it.