Would Microsoft or Amazon.com buy Netflix? Doubtful, analyst says

Nov 26, 2012

Amazon.com and Microsoft are two of the cash-rich companies that investors speculate may be interested in buying Netflix. But would either of them want to? One analyst says he doubts it.

Activist investor Carl Icahn kicked up the takeover speculation last month when he disclosed that he’s bought 10 percent of Netflix. He says Netflix is too small on its own and needs to be bought by a bigger company – like Amazon, Microsoft or Google.

Netflix dominates in the world of online movie and TV streaming but it’s disappointed investors because it’s not adding subscribers as fast as they thought. Growing competition from Amazon may be one reason.

Morningstar analyst Michael Corty says he thinks Netflix is overvalued and doesn’t think it makes sense for Microsoft, Amazon or Google to buy it. Though he says, who knows?

"Sometimes these cash-rich, large companies make dumb acquisitions," Corty said. "Microsoft bought aQuantive a few years ago and they’ve basically written the whole thing off."

One reason Corty says buying Netflix would be a dumb move is that Netflix doesn’t really have exclusive licensing deals with movie and TV companies. And he says Netflix will have to renegotiate the deals it does have – probably on worse terms.

He says Microsoft would probably be the most likely buyer but he says that’s because Microsoft doesn’t have as much experience in the world of streaming content as Amazon or Google. Netflix CEO Reed Hastings recently said he’s leaving Microsoft’s board, fueling takeover speculation. But Hastings has been vocal that he wants to keep Netflix independent.