Netflix and Amazon May Become a Joint Venture

Tuesday, July 14th, 2009 at 7:59 am

If you can't beat 'em, buy 'em, and most would agree that Netflix has grown too large (and too strategic) to beat. So who wants to buy them? If you believe the latest rumor, Amazon wants to buy the online DVD rental service, news of which has sent Netflix stock soaring to the highest it's been in 11 weeks.

"There's heavy call buying and the stock is up on renewed takeover talk, with Amazon being mentioned specifically," said Fred Ruffy, the senior options strategist at WhatsTrading.com. "It's pretty typical of speculative buying."

While Netflix and Amazon both compete in the Internet video business, not everyone is convinced a takeover makes much sense. Michael Pachter, an analyst for Wedbush Morgan Securities, points out that Amazon has distribution centers all across the U.S., meaning the company would have to collect sales tax in those states. Should that happen, subscribers would likely end up footing the bill.

As expected, both Amazon and Netflix said they don't comment on rumors or speculation.