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Posted: 26 Sep 2016 02:25 PM PDT
The list of potential Twitter acquirers continues to grow. In addition to recent reports that Salesforce and Google are interested in possibly buying the real-time news service, Disney is now said to be considering an acquisition bid as well. The news and entertainment conglomerate is “working with a financial adviser to evaluate a possible bid for Twitter,” according to a Bloomberg News report that cites anonymous sources familiar with the situation. In other words, Disney and an investment firm are going over Twitter’s financial data and looking at the potential benefits of combining the two companies, but that process could fall apart or be shelved at any point. Salesforce and Google are said to be in a similar situation, according to a number of recent reports, which also said that Twitter is working with Goldman Sachs to consider potential takeover offers for the company. That news helped push Twitter’s share price up 21% in mid-day trading on Friday. Until the latest takeover talk began, the stock had fallen by more than 50% in the past year, and even at its current level it is still well below the $70 it traded for after its initial public offering in 2013. CNBC also reported on Monday that a sale of Twitter could happen fairly quickly—within the next 30-45 days, sources said—and that Microsoft may be interested in making an offer as well. Although Disney may not seem like an obvious candidate to acquire Twitter, there are a number of reasons why it may be interested. Although the service only has about 300 million users, far less than Facebook’s 1.5 billion, it has a treasure trove of data on the interests and behavior of those users. That kind of data, which could be used to target advertising and other content to users, is undoubtedly part of what Salesforce and Google see as valuable about Twitter, and a media company like Disney would likely see that value as well. Disney also owns ABC News and sports giant ESPN, and Twitter has become both a real-time news source of remarkable power and a place where millions of users go to discuss both the news and in particular sporting events. Twitter co-founder Jack Dorsey is also on Disney’s board of directors. Twitter has spent much of its time and resources recently signing deals with video providers such as the National Football League and Bloomberg to stream live content,including Monday’s presidential debates (which will also appear on Time Inc. websites including Time and Fortune, as part of a deal with Twitter). With its resources, Disney would be able to help Twitter improve its video streaming and possibly strike new deals with other content providers. As a result of a recent acquisition, Disney owns a stake in BAMTech, the digital arm of Major League Baseball, which runs streaming services for ESPN and others, including Twitter. With more and more TV content moving to mobile and digital services, Disney is probably also looking for ways to hedge its massive investments in traditional TV such as ESPN, and the real-time news service may look like a way to do that. One of the major sticking points for any possible Twitter acquirer including Disney, however, is the fact that a reasonable premium for the shares would put a deal for Twitter in the $20-billion range, and that’s a lot of money to pay for a company that lost half a billion dollars last year and is showing little or no user growth. Also, as Recode’s Peter Kafka points out, such a deal would be more than Disney paid for Pixar, Marvel Entertainment and Lucasfilm combined, and yet there is virtually no chance that Twitter would turn out to be as valuable as any of those investments. This article originally appeared on Fortune.com   |
Wednesday, September 28, 2016
Twitter Stock Surges On Disney Takeover Rumor - Fortune
Here’s Why Twitter Might Finally Be Sold - TIME Business
Posted: 27 Sep 2016 06:29 AM PDT
Ever since Twitter became a popular social network, people have been imagining it getting swallowed up by a bigger company. Back in 2009, some thought it a good fit for Google, or Microsoft, or Apple. In some cases, companies tried: Googleagain, and also Facebook, and even Al Gore.
It never happened for a few reasons. First, Twitter’s board, including current CEO Jack Dorsey, simply didn’t want to sell. Later on, questions emerged over how Twitter would monetize its network and keep users coming, dimming the company’s appeal as a takeover target. But the most vital reason why Twitter hasn’t been bought — or seriously considered as an acquisition candidate — has been its high price.
Twitter went public in late 2013 at $26 a share, valuing it at $18 billion. After Facebook shares began to rally, investors bid up Twitter’s price as high as $69 a share. But after Twitter’s user growth flatlined and multiple efforts to boost its fortunes fizzled, the stock sank as low as $14 a share last June. But even at that nadir, when Twitter’s value was around $12 billion, the stock was still seen as too pricey. Net profit was nowhere in sight, quarterly sales were sluggish to flat, and the company still had no clear turnaround plan in sight.
So potential buyers have been biding their time hoping the stock price would keep falling. If Twitter has another disappointing quarter, its stock would surely slump again — a prospect that analysts have been signaling as likely by downgradingthe stock. In that event, right now would be a prudent time to approach buyers. Twitter’s board has reportedly been considering a sale this month. And sure enough, names of potential buyers are being tossed around, starting with cloud computing firm Salesforce and Google parent company Alphabet.
Twitter’s stock rallied 20% Friday on reports of the Alphabet and Salesforce rumors. One Salesforce exec fueled the fire by tweeting “why Twitter?” and listing four reasons — a bizarre move, given that the tweet made Twitter’s price 20% more expensive. Analysts quickly emerged to explain why a Salesforce-Twitter deal made little sense. The same day, another report cited Microsoft and Verizon as potential suitors.
Such takeover rumors are common in the tech market. But they frequently end up being little more than speculation. After all, leaking out word to the financial press of a potential sale of the company is often a quick way to temporarily push up a stock’s price or to prompt fence-sitting buyers to jump into the ring.
The problem is, outside of Google, none of the potential deals make much strategic sense. Salesforce is an enterprise company and Twitter is primarily a consumer-facing service. Microsoft, too, is moving toward the enterprise market; it also has its hands full with its $26 billion purchase of LinkedIn. Verizon, which itself is grappling with its Yahoo deal, has little potential for synergy with Twitter’s often unruly audience.
Things became even more interesting Monday when Disney was said to be working with an advisor to evaluate a possible bid for Twitter. A Twitter-Disney combo is intriguing. With Vine, Periscope and live video tie-ins with the National Football League, Twitter has been moving toward becoming a video platform for some time. And Disney offers just that, primarily in ESPN’s live sports broadcasts, but also with ABC’s news broadcasts and big events like the Oscars.
Such events are already big draws for Twitter users, but Twitter has been struggling to tighten the integration in a way that enhances both the video content and the conversation around it. Under CEO Bob Iger, Disney has had a strong track record of buying properties like Marvel and Lucasfilm and seeing them flourish. But Disney is also facing a crisis of cord-cutting in cable channels like ESPN, which has long been a cash cow. Twitter could help Disney transition its cable audience to an online format.
Of course, Google parent Alphabet also remains a strong contender and a logical partner. Twitter has excelled at branded advertising, but struggled with the more lucrative targeted ads that turned Facebook into a digital ad powerhouse. Google’s massive user data could help here. In return, Twitter could bring Google the social network it could never build itself. (Remember Google Plus?) YouTube, a key growth engine at Google, could also benefit from closer ties with Twitter. As socially gifted companies like Facebook and Snapchat push hard into video, YouTube is looking vulnerable.
But if Alphabet wanted to buy Twitter, it could have done so when Twitter traded at $14 a share. Since then, Alphabet has become more cost-conscious, scaling back initiatives like Google Fiber, Nest and robotics projects. And then there’s the question of how regulators in the U.S. and Europe would look at an Alphabet-Twitter deal. A Disney deal would likely win regulatory approval much more easily.
Thanks to the rally over the past couple of trading days, Twitter is again overpriced. It’s currently worth $20 billion, and the board will surely ask for more than that, especially if a bidding war breaks out. Yes, all of this remains speculative. What’s different is that, perhaps for the first time, the pieces are aligning to make a Twitter sale easier to imagine.
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