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Netflix

Netflix. Founded in 1997 World’s leader in internet subscription for online video streaming Unlimited access 2010 Revenue of $2.1 B, 30% increase. Importance of Netflix Subscriber Growth . More money to license content with More word of mouth marketing to others who are not subscribed

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Netflix

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  1. Netflix • Founded in 1997 • World’s leader in internet subscription for online video streaming • Unlimited access • 2010 Revenue of $2.1 B, 30% increase

  2. Importance of Netflix Subscriber Growth • More money to licensecontent with • More word of mouthmarketing to otherswho are not subscribed • More money to spendon R&D to improve user experience

  3. Akamai Technologies • Increasing market presence • Wider solutions • Diversification • ‘07: Red Swoosh, Netli • ‘08: Acerno • ‘10: Velocitude

  4. Media & Entertainment Manufacturing & Automotive Gaming Akamai Market Presence Public Sector And more…… Financial Services

  5. Industry • Biggest threat: Amazon • 20M Netflix subscribers vs 60M cable subscribers • Netflix handled 61% of downloaded and streamed movies in Jan-Feb 2011

  6. M&A Market 2010-11 Acquirer Target • HP 3Par • Dell Compellent Technologies • IBM Cast Iron Systems Reason for Mergers: Cloud Computing

  7. Reasons for Merger Netflix Akamai

  8. Valuation Methods • Comparables: $35.02 • EV/EBITDA: $15.87 • P/E Multiple: $40.53 • DCF: $40.07 • Avg of 3 methods: Comparables, P/E multiple, DCF • Intrinsic Price of $38.54 • Current Price $37.60 (as of April 1, 2011)

  9. Synergies • Akamai currently supports 50% of Netflix services • Vertical Integration • Synergies through cost savings • Valued at $2.3 B

  10. Offer Price • Acquisition using post merger stock at price of $267 • 0.1609 shares for 1 Akamai share • 14.25% premium over market price

  11. Post Merger Analysis

  12. Debt Structure • $220M in debt for Netflix • No changes to structure

  13. Management • Current Facilities

  14. Future Plans • International Markets • Miramax deal • Utilize Akamai’s business relationships with giant media companies • Unrealized synergies may exist • Estimated 69 million subscribers by 2016

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