Buying Twitter

Another day, another rumour about Twitter's apparently imminent purchase. Both Disney and Salesforce are said to be teeing up bids, and there are surely others in the pipeline.

It is not a surprise if indeed Twitter are looking to be acquired. The stock is quite clearly underperforming, as this analysts's damning assessment shows:

"Based on slowing user growth, poor product implementation/execution, decreasing user engagement, inferior advertising technology, platform safety issues, and strong competition,"

Issues bedevil the company. So far this year it has lost many of its top management, growth as stagnated, and it is not finding it easy to improve its finances.

Compare this to how Facebook has fared since its own IPO, and no wonder investors are fed up. The difference in share price (see graph) reflects the varying fortunes; Twitter is still in neutral with around 313 million monthly active users, whereas Facebook has rocketed to 1.71 billion.

Twitter is not in a good way, and even the return of its co-founder, Jack Dorsey, has so far failed to revitalise what was once the darling of the tech world.

Let's assume for a moment that Jack fails in his attempt to rekindle the fire beneath, as the market thinks will happen, and the Board see no alternative but to sell. The question is, who would want to buy Twitter, and why?

Disney's use with the site is easy-ish to understand: Twitter would give them a shot in the distribution arm. Plus Jack Dorsey is on the board of Disney.

Google maybe interested too, a rumour partly fuelled by the fact that Alphabet (Google's parent) produced more revenue, $21 billion, last quarter, than Twitter is actually worth. Plenty of people have pointed out how Twitter could be wrapped into YouTube or one of the many other Google lines.

It's noticeable that Salesforce's share price fell on news of a Twitter buy. The two companies already have a partnership, and most analysts feel that there is nothing to be gained from a full-on acquisition. "Frankly, we struggle to see any near-term revenue opportunities from the combination of and Twitter that aren't available today via the current partnership," Morgan Stanley analyst Keith Weiss wrote.

Then there's the final issue of cost. Kara Swisher of Recode thinks that a price $18bn - $30bn is not wide of the mark, which would limit the suitors. All the above names could, if they wanted, afford it, as could Apple, Alibaba, and so on. Although at this price, the economics really have to stack up so as to assuage investor fears about overstretch.

But - and it is a big but - cash is not the most important thing here.

No matter its current, and no doubt future woes, Twitter is a princely brand, with a core technology that works, and a global user-base. With so much of M&A being about psychology, landing Twitter would be a fishing trip that any CEO could dine out on for many years to come.

#MA #Twitter

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