Since taking over the company in 2014, Microsoft CEO Satya Nadella has a history of making significant acquisitions, including LinkedIn, Nuance, Activision Blizzard, and the developer behind Minecraft.
According to Reuters Breakingviews, Nadella is now considering adding streaming giant Netflix to his shopping list in 2023. Below are the details…
Microsoft CEO Satya Nadella wants to acquire Netflix
The two companies already have a close relationship, with Microsoft serving as Netflix’s advertising partner for its new advertising-supported subscription service. Microsoft President Brad Smith also sits on the Netflix board, further strengthening the connection between the two companies.
One reason for a potential partnership is Microsoft’s interest in offering a video game streaming service across multiple devices. Netflix has its own plans in the gaming industry, including the acquisition of developer Spry Fox in 2022, and becoming part of the Microsoft empire could supercharge those ambitions. A bundle offering streaming TV and games together could be a viable option for the two companies.
However, any deal would come with a high price tag. With a market value of nearly $190 billion in early December, according to Morningstar analysts, a 30% premium on Netflix’s value would be required for Microsoft to make the acquisition.
While there may be some cost savings to be found, the implied return on investment would only be half of the 8% weighted average cost of capital, after taking into account the projected $8 billion of operating profit for Netflix in 2024. Despite this, the strategic sense and potential ease of regulatory approval make Netflix a tempting target for Nadella and Microsoft.