As LinkedIn finds a buyer, Twit­ter goes hope­lessly hun­gry

Financial Mirror (Cyprus) - - FRONT PAGE - By Dou­glas McIn­tyre

Twit­ter Inc. has not found a buyer, de­spite a drop in its stock price from $55 in Oc­to­ber 2014 to $14 re­cently. Its weakness as a buy­out tar­get wors­ened as LinkedIn Corp. was sold to Mi­crosoft Corp. for $26 bil­lion, a 50% premium to the clos­ing price the day be­fore the deal was an­nounced. The pes­simism about Twit­ter grew in just one day.

LinkedIn and Twit­ter have two things in com­mon. Each is known as a so­cial net­work, un­der the in­dus­try um­brella con­trolled al­most com­pletely by Face­book Inc. And LinkedIn’s share price was $275 in Fe­bru­ary 2015. It dropped to un­der $100 re­cently.

Ex­perts would ar­gue that be­cause LinkedIn has a mul­ti­fac­eted busi­ness model, which in­cludes a large pay­ing sub­scriber base, its prospects are bet­ter than Twit­ter’s. LinkedIn also brings in rev­enue from ad­ver­tis­ing. How­ever, that is only one of sev­eral ways it makes money. Twit­ter’s model re­lies al­most ex­clu­sively on ad­ver­tis­ing alone.

The Mi­crosoft pur­chase of LinkedIn has been de­scribed as a play to in­crease the huge soft­ware com­pany’s pres­ence in cloud com­put­ing. LinkedIn prod­ucts can be cross-sold with Mi­crosoft Of­fice and other Mi­crosoft ser­vices that have as their tar­gets busi­ness users. Is the po­ten­tial suc­cess of the model worth the $26 bil­lion pur­chase price? It is not based on LinkedIn’s $3 bil­lion rev­enue last year. Mi­crosoft’s rev­enue was $93 fis­cal

The lack of a buyer for Twit­ter raises the quandary that has trou­bled a num­ber of large so­cial me­dia com­pa­nies, which in­clude, at least, Zynga Inc. (NAS­DAQ: ZNGA). Does Wall Street care about th­ese firms at all if they have only one line of rev­enue that has a dif­fi­cult fu­ture? Are their sub­scriber bases worth much at all? Twit­ter has over 300 mil­lion.

Twit­ter has been for sale for a long time now. Not that the man­age­ment has hung out a “for sale” sign. In light of that, LinkedIn and Mi­crosoft have set a com­bi­na­tion that says that size mat­ters in so­cial me­dia. But so does busi­ness model. Big tech com­pa­nies looked at their M&A strate­gies as the LinkedIn deal hit the news. Did any of them even se­ri­ously think about Twit­ter as a tar­get? There only needs to be one. The next few weeks will tell whether the tech world be­lieves Twit­ter has any sig­nif­i­cant “syn­ergy” value at all.

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