Buyout rumors surrounding Twitter (TWTR - Analyst Report) have been doing the rounds for quite a while now but recently the talks have started to gain steam. Media reports indicate that management is “moving closer to sale” having exhausted the options that would have allowed it to remain independent.
Earlier this month, a critical board meeting was held regarding the possibilities for Twitter. However, the company’s board had refrained from arriving at a decision back then. Instead, the Jack Dorsey-led team bargained for some more time to “turn things around”.
The micro-blogging site has been struggling with too many issues for a long while now. Apart from a slowdown in user growth and advertising dollars, the most important concern for investors is that even after a decade of operations, Twitter hasn’t raked in profits. That was because despite Twitter’s uniqueness, management struggled to carve out a path for growth and monetization.
Now with the increasing possibility of a sale, there is no dearth of suitors for this social platform. It is however quite different from other social media platforms. It is the go-to platform for news. No need to say that one of the most important assets of this company is the vast amount of data it collects that can be leveraged by so many companies like Google parent Alphabet (GOOGL - Analyst Report) , Salesforce (CRM - Analyst Report) , Disney (DIS - Analyst Report) and others like Microsoft and Verizon as well.
Let’s see how these companies will benefit, should they consider taking over Twitter.
This leading customer relationship management platform provider missed taking over LinkedIn earlier this year. It is now eyeing Twitter’s treasured data for getting insights especially sentiment analysis, which can greatly enhance its offerings. In addition, Salesforce will also get access to a vast number of companies that use it as a marketing tool.
According to Bloomberg, if Salesforce succeeded in acquiring Twitter, “[it] would be buying a consumer-facing service with unique challenges -- such as monitoring hate speech and fighting state censorship -- that a corporate software company rarely handles.”
Moreover, Salesforce already has an arrangement with Twitter whereby it uses the latter’s data to generate leads and drive growth. Despite an attractive valuation, buying Twitter will still weigh on Salesforce’s financials as it has nine other acquisitions in the pipeline.
No wonder, Salesforce investors weren’t too happy regarding this speculation.
Yes, apparently this prominent media company is also interested in taking over Twitter. It looks like Disney intends to broaden its media footprint with this acquisition, especially giving a boost to its video-streaming plans. This is because, lately, Twitter has upped its game in the streaming space. It has launched apps for Apple, Amazon and Microsoft devices in order to allow their users stream content like NFL Thursday Night Football, Major League Baseball (MLB), National Basketball Association (NBA), Pac 12 Networks and even Campus Insiders, Cheddar and Bloomberg News.
Disney, on the other hand, has invested in companies like Hulu, Vice and BAMTech to further its position in the streaming space. Acquiring Twitter does make sense in this respect. Twitter could benefit from Disney’s association with television networks.
However, as Bloomberg points out, there will likely be a conflict of interests as Dorsey is also a member of the Disney board.
Google is widely believed to be leading in the race of potential suitors for Twitter. This is because a lot of its offerings are already integrated or can be easily combined with Twitter. The search engine has already included ‘Tweets’ in its search results page. This apart, Google can also drive great value by integrating Twitter with YouTube or its Android mobile operating system.
Buying Twitter will expand its presence in the social media space, for which it has been striving for a long time now, especially in the face of mounting competition from Facebook. Apart from this, Google will also be able to boost its ad dollars by integrating deeper with Twitter and also cross-selling to the micro blogging platform.
While it will be interesting to see how Twitter evolves after its takeover, we can only speculate as of now. Twitter has refrained from making any official statement regarding its sale. But the company will surely get a new lease of life once it finds a taker.
At present, Twitter is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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