With Thompson in CEO seat, Yahoo may go after Netflix
Speculation swirls that Netflix acquisition could be boost that Yahoo needs
Computerworld - Just one day after Yahoo announced that it found a new CEO, speculation began swirling that the Internet company may be looking to scoop up Netflix.
The company announced Wednesday that it hired Scott Thompson, the president of eBay's PayPal business, as its new CEO. And while that news was still making headlines, Piper Jaffray analyst Gene Munster fired up the rumor mill during an appearance on CNBC, noting that Yahoo may be interested in buying the Internet movie rental company.
"In the back of my mind, I wonder if they buy Netflix," Munster said. "That would make a lot of sense."
If the comment has any foundation, it could be a smart move for Yahoo, said Ezra Gottheil, an analyst with Technology Business Research.
Neither Yahoo nor Netflix responded to a request for comment.
"Despite [Yahoo's] negative growth, it's still a robust business with a large membership. Netflix would perk it up," Gottheil said. "Netflix is a little bruised from the Qwikster debacle, but it still has members and relationships with the content creators. Online video distribution is a major growth area, and there has to be room for more than just Amazon."
Netflix took a serious blow to its business and its popularity last year when it was forced to abandon plans to spin off its DVD-by-mail arm into a separate business dubbed Qwikster. Users quickly and loudly complained of the price increase and said that splitting into two businesses -- one for streaming content and one for renting DVDs by mail -- would be an inconvenience.
That was a big stumbling point for Netflix and may leave the company open to an acquisition.
"Yahoo would need to address the customer satisfaction issues," said Zeus Kerravala, principal analyst with ZK Research. "Netflix has a huge customer base, despite the loss, and Yahoo could market that service to its users."
But he also noted that Yahoo would need to work hard to repair the Netflix image if the company wants to get the full benefit of the purchase.
"Yahoo would have to repair some of the customer satisfaction issues Netflix inflicted on themselves, but there's still value in the Netflix content agreement and customer base," Kerravala added.
If the acquisition speculation has any merit, the next question would be whether Yahoo would buy Netflix as part of an effort to revitalize the company or as an effort to sweeten the pot for its own acquisition.
After Thomspon's appointment was announced, many analysts said they think the new CEO was brought on board to rebuild the company, not get it ready to be sold.
"Yahoo is relevant. It has millions of users, it is profitable and it has assets," Gottheil said. "The acquisition would make growth, even rapid growth, a distinct possibility."
While Gottheil said he can't see Yahoo's board overlooking a great acquisition offer, a Netflix purchase might be big enough and exciting enough to make them take a wait-and-see attitude.
Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, on Google+ or subscribe to Sharon's RSS feed . Her e-mail address is email@example.com.
Read more about E-business in Computerworld's E-business Topic Center.
- Path Selection Infographic Path Selection Infographic
- Hyperconvergence Infographic A wide range of observers agree that data centers are now entering an era of "hyperconvergence" that will raise network traffic levels faster...
- Preparing Your Infrastructure for the Hyperconvergence Era From cloud computing and virtualization to mobility and unified communications, an array of innovative technologies is transforming today's data centers.
- How WAN Optimization Helps Enterprises Reduce Costs If you wanted to break down innovation into a tidy equation, it might go something like this: Technology + Connectivity = Productivity. Productivity...
- LIVE EVENT: 5/7, The End of Data Protection As We Know It. Introducing a Next Generation Data Protection Architecture. Traditional backup is going away, but where does this leave end-users?
- On-demand webinar: "Mobility Mayhem: Balancing BYOD with Enterprise Security" Check out this on-demand webinar to hear Sophos senior security expert John Shier deep dive into how BYOD impacts your enterprise security strategy... All E-business White Papers | Webcasts