Autonomy Accounting Fraud Could Scare Potential Netflix (NFLX) Acquirers - Analyst

November 26, 2012 12:22 PM EST
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Albert Fried & Company is out waving a red flag on Netflix (NASDAQ: NFLX) Monday in light of last week's news that HP is writing-off $8.8 billion for its 2011 Autonomy takeover due to accounting fraud.

While Netflix's accounting may not be fraudulent, it is "aggressive" says the firm. This could dissuade potential suitors, they think. "We think NFLX's aggressive accounting practices in the context of the Autonomy fiasco are enough to dissuade potential NFLX suitors. We think corporate boards will be more diligent in large strategic transactions and we think due diligence is a potential NFLX deal head wind."

"We predict a NFLX deal owing to its $7 billion in content liabilities, has similar risk reward economics for a potential buyer as Autonomy. As a result, we think Carl Icahn is perhaps the only potential bidder for this Corporation. And we doubt CEO Reed Hastings would accept Carl Icahn as his Chairman or as a fellow board

If Icahn were to bid for Netflix, Albert Fried's analyst believes it would be rejected by the company. Contrary to media reports, they do not believe Microsoft (Nasdaq: MSFT) will bid.

Bottom line, the firm said Mr. Icahn has notable successes and notable failures in the bankruptcy courts; "we think fundamentals should trump takeover speculation" in the case of Netflix.

For an analyst ratings summary and ratings history on Netflix click here. For more ratings news on Netflix click here.

Shares of Netflix closed at $82.95 yesterday.

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