WSJ: Netflix Jumps On Takeover Chatter But Validity Doubted

From the Wall Street Journal, Business

By Shara Tibken    Of DOW JONES NEWSWIRES  

NEW YORK (Dow Jones)--Shares of Netflix Inc. (NFLX) surged Thursday, setting another all-time high, on chatter online retailer Amazon.com Inc. (AMZN) may be interested in buying the online video rental giant.

Speculation about a tie-up between Amazon and Netflix has swirled many times in the past, but the chatter has never amounted to a formal deal. Again Thursday, there were no specific details about a merger, and analysts were quick to discount the validity of the speculation--saying it wouldn't make sense for Amazon to buy Netflix at its current elevated levels and because of several other factors.

In recent trading, Netflix shares climbed 6.2% to $114.53 after earlier jumping as much as 11% to a new all-time high of $119.50. Shares have tripled over the past 12 months and have soared 26% this week alone.

Amazon, meanwhile, edged up 19 cents to $134.06, up 81% over the past 12 months.

Representatives from Netflix and Amazon weren't immediately available to comment.

Needham & Co. analyst Charles Wolf said that while some have argued in favor of an Amazon/Netflix merger by saying Netflix offers a "beautiful" interface and "great" discovery tools, Amazon also provides a similar user experience.

"There's no inherent technology that Netflix has that Amazon would want in that respect," Wolf said. "I'd never say never, but I would say such an acquisition doesn't make sense, at least from Amazon's perspective."

And Wedbush analyst Michael Pachter said Amazon wouldn't want to buy Netflix, as that would give the company a physical presence in nearly every state--forcing it to collect sales tax on all purchases made on its site.

Read full Article