Netflix makes an attractive takeover target for Amazon and its new tablet

editor's corner

Jim O'NeilNetflix (Nasdaq: NFLX) as a takeover target? It makes sense to Amazon (Nasdaq: AMZN).

That's the latest rumor on the street, with both Bloomberg and Seeking Alpha running stories that point out the more than 50 percent the stock has slumped in recent weeks. Netflix was selling for some $304 in July; it closed Monday at just over $132.

The $9 billion that has evaporated from its market value over the past two months has made Netflix a bargain for just about any company looking to jump into the streaming business. Netflix today has a market cap of $6.95 billion--it's not quite a red tag sale but could still be an attractive deal.

A buyer also would have the option of reducing the final price by spinning off the DVD business, the recently renamed Qwikster, something Netflix itself might opt to do if it doesn't get gobbled up.

Last week, Wedbush analyst Michael Pachter wrote that he believed Netflix spun its DVD by mail business off so that it could sell itself to Amazon.com--not the DVD business, but the video streaming business. Amazon has been working overtime to make its own content offerings attractive, but it still has only 8,000 titles available for instant viewing. By purchasing Netflix, essentially a turn-key operation, Amazon would become the biggest fish in the pond.

Netflix comes with some pretty substantial baggage as well. It has been signing new content deals and spending money by the boatload. And, of course, there's a reason Netflix (and its share price) have fallen from grace and suddenly become a bargain: its subscribers are ticked off at it for raising prices and for splitting the two businesses apart.

Would a new owner appease customers?

Perhaps a new owner like Amazon, which is rumored to have a tablet ready to give Apple's (Nasdaq: AAPL) iPad some competition, is what Netflix needs.

Amazon is rumored to be rolling out its iPad killer Wednesday, with TechCrunch reporting it has a 7-inch touchscreen, runs on Google's (Nasdaq: GOOG) Android OS and--here's the kicker--is expected to carry a very low price.

That could be a match made in heaven.--Jim

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