Will any potential Twitter buyers actually bite?
For a company that has been in Wall Street’s doghouse for years, Twitter (TWTR) sure has no shortage of interested acquirers from the tech and media worlds.
According to multiple reports, Alphabet’s (GOOG) Google, Microsoft (MSFT), Verizon (VZ), Walt Disney (DIS) and Salesforce.com (CRM) have expressed interest in buying the San Francisco-based microblogger, though it’s unclear how many, if any, will make a formal bid.
Salesforce declined to comment for this story as did Microsoft, and Verizon denied “specific rumors alleging it has made an offer for the company.” The other potential suitors couldn’t be immediately be reached. Twitter also wouldn’t address the media reports.
CNBC’s David Faber said a sale could happen in about 30 to 45 days, earlier than expected, as pressure mounts on Twitter, whose shares have slumped more than 43 percent over the past five years -- even with the stock’s recent run-up fueled by buyout speculation.
“The company is rolling out new initiatives like NFL content, NCAA content, more Vine & Periscope content, better ad analytics, DoubleClick integration, and more ‘live’ content,” wrote Robert Peck, an analyst at SunTrust Robertson Humphery in a recent note to clients. “The fourth quarter will be critical in demonstrating progress or emphasizing challenges -- we think the company would want to see the success of these initiatives before considering any potential sale.” Peck rates the shares as “neutral.”
According to a note from Barclay’s analyst Kannan Venkateshwar, a Disney acquisition of Twitter makes sense given how closely the site is tied to big broadcasts such as last night’s presidential debate and sports, which account for almost half of all Twitter TV conversations. Such a deal would be among the largest ever done by the Burbank, California, media and entertainment giant, whose properties include the ESPN cable sports channel.
However, in an email to CBS MoneyWatch, Wedbush Securities analyst Michael Pachter said he isn’t sure if Twitter would be any better off as part of a larger company. He sees “no fit whatsoever with Disney.”
“I think it’s entirely appropriate for Twitter to remain independent,” wrote Pachter, who rates Twitter as “neutral” and doesn’t cover Disney. “Its service isn’t quite like any other, and other than Facebook, I don’t see them as a good fit for anyone. I suppose Google could sell more ads, and there may be some synergies with YouTube, Google, etc., but I really don’t see a fit there.”
Twitter’s challenges are many. First, its 313 million monthly active user base is dwarfed by rivals such as Facebook (FB), whose monthly users top 1.7 billion. Twitter also is being pressured by newer rivals such as SnapChat, which Bloomberg News noted earlier this year also has more daily users.
Wall Street analysts have long argued that Twitter is far too complicated for most users. Indeed, a few years ago, Twitter Chief Financial Officer Anthony Noto accidentally Tweeted a message to a Wall Street analyst that Noto had wanted to send in a private direct message. Former Congressman Anthony Weiner made the same mistake when he accidentally publically posted naked pictures of himself.
Another problem has been instability in the management ranks. CEO Jack Dorsey is a case in point. The 39-year-old helped found San Francisco-based Twitter in 2006, but he was ousted as CEO two years later after reportedly clashing with colleagues. When Dorsey was rehired to run Twitter in 2015, he chose to continue as chairman, CEO and president of payments processor Square (SQ), even as skeptics noted the difficulty of managing two publicly traded companies at the same time.
Still, some analysts, such as Scott Kessler of S&P Global Market Intelligence, say Dorsey hasn’t gotten credit for the gains Twitter has made. Kessler noted that Twitter reaches a global audience and that it has a healthy balance sheet, with $3.6 billion in cash and investments as of March. Wall Street analysts expect the company to post revenue gains of 15 percent this year and 12 percent next year.
Even if it does, it may come too late to help Twitter remain independent.