Apple buying Disney? Needham says they are 'worth more together'
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The Walt Disney Co. (DIS) is in a state of transition during its centennial year, as Chief Executive Bob Iger looks to cut costs, figure out the direction for the company's streaming and digital businesses and, reportedly, is considering the possibility of selling off properties such as Hulu and ESPN.
But, could anything be more transitional than Disney (DIS) being acquired by Apple (NASDAQ:AAPL), one of the few companies with the financial reserves to buy the legendary entertainment giant?
Such a tie-up would create a juggernaut in technology, entertainment and content unlike anything ever seen. And, on several levels, makes a lot of sense, according to Needham analyst Laura Martin.
In a research report, Martin said with Apple (AAPL) having 1.25B "unique consumers" using its products and services, and the 570M consumers that Disney (DIS) reaches every year tie up, the company's "are worth more together than separately."
Martin said that Apple (AAPL) and Disney (DIS) are "complementary" due to each company having particular strengths that could become stronger together. For Apple (AAPL), that would be how it distributes content to its customers, as witnessed not only by its 1.25B "unique and wealthy users", but the 2B iPhones and iPads that those customers owned. Meanwhile, Martin said that what Disney (DIS) does best is create well-known content franchises which it is able to distribute on digital screens globally, "as well as in the physical world."
Other factors that Martin said are positive for Apple (AAPL) and Disney (DIS), and which would strengthen the companies should they tie up, are that both companies are "marketing juggernauts," they have rabid fanbases of customers, are able to charge premium prices for their offerings and are two of the biggest, and most widely recognized and popular brands around the world.
By market cap measure, Apple (AAPL), with valuation of $2.6T, is in a league that includes Microsoft (MSFT) and, really, no one else is even close. Disney (DIS) has a market cap of about $178B. Add on a premium that would be included with and purchase and it's safe to say that Apple (AAPL) could easily pay more than $200B to bring the Disney (DIS) empire under its watch.
Yet, even at that price, Martin said the move would make sense for Apple (AAPL), as it would place itself in a content and technology position that could be unassailable.
"Defensively, content beats technology as a multi-decade moat," Martin said, adding that bundling Disney's (DIS) products with those of Apple (AAPL) would make Apple (AAPL) shareholders happy by potentially giving a 25% boost to Apple's (AAPL) market value.
Apple (AAPL) will give its next update on its business performance when it reports its fiscal second-quarter results in April. On Wednesday, Apple (AAPL) said it would kick off its annual Worldwide Developers Conference at its Apple Park campus on June 5.