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.

Twitter

Twitter’s not doing so hot these days. The company has failed time and time again to fix its monthly active users (MAU) problem, largely because it was too afraid of its core users to make the changes necessary to attract new ones. With the company’s new attempts to make tweets longer seems too little too late. Management has brought co-founder Jack Dorsey back on board, hoping his innovative thinking can help with its product issues, but it’s unlikely to change the company’s downward trajectory.

So, that means it’s ripe to be bought out, right? And what better company than Apple to take on this mess? Well, there’s one little problem. Apple’s already tried social media and it failed — big time. Ping, as it was called, was a music-focused social network. When it was launched, everyone with an iTunes account had a profile, all 160 million of them. But almost none of them actually used it and it was scrapped quietly a couple years later. The fact is, Apple doesn’t have what it takes to fix Twitter. It doesn’t have the right mindset. The only thing Apple brings to the table is money and unfortunately this is simply a problem money can’t fix.

Conclusion

Look, I get it. Apple is in need of some pepping up. Even with last year’s launches of Apple Music and the Apple Watch and record profits, the stock actually fell 3.72% on the year.

It may be because the iPhone’s continued rise hasn’t been meteoric enough to distract from slumping iPad and Mac sales. Or it could be because innovation at Apple has seemingly stagnated. After all, the company was at the forefront of innovation with the iPod, the iPhone and the iPad. With Apple Music and the Apple Watch, it’s been behind the curve instead of ahead of it.

But if Apple’s shareholders are desperate enough to insist that the company buy out the likes of Netflix, Disney or Twitter, they have to be really worried about the company’s ability to innovate on its own past its current place. While that’s certainly a topic for another day, it would be silly to consider an acquisition of this proportion as a solution.