Microsoft-LinkedIn deal ignites speculation over Twitter buyout

June 19: In the relentless push towards consolidation in technology and social media, Twitter, the social networking site that allows users to send and receive short messages, or tweets, has been the perennial bridesmaid.

But this week’s megadeal between Microsoft and LinkedIn has renewed speculation on Wall Street that Twitter needs to attract a suitor or risk being overtaken by ever-larger competitors.

“If current trends continue, it’s inevitable that Twitter will get acquired,” Robert Peck, managing director and internet equity analyst at SunTrust Robinson Humphrey, told me this week. Peck has long considered a Twitter deal likely, and he renewed that prediction last week even before the Microsoft-LinkedIn deal was announced. This week numerous analysts piled on to the notion.

Investors seem to agree: At one point this week, Twitter shares were up 17% on deal speculation, pushing the company’s market capitalisation to nearly $11.5 billion.

But investors expecting a big deal at a LinkedIn premium in the next few months may want to think twice.

Given the similarities between LinkedIn and Twitter, it’s not hard to see why shareholders would be betting on a sudden windfall.

Until Monday’s announcement, both companies’ stocks were trading at relative bargain prices, both down about 42% in the last six months. (Before this week’s rally, Twitter shares were barely half their $26 initial public offering price.)

Both offer global reach and a large number of users: 433 million registered members worldwide for LinkedIn and 310 million active monthly users for Twitter (the numbers aren’t directly comparable because not all LinkedIn members are active users.)

Apart from Facebook and several Chinese social networking companies, Twitter has the largest user base among independent social network companies, according to Statista. (Statista estimates LinkedIn’s active monthly users at 100 million.)

Twitter solidified its place as a hub of the global news conversation during and after last weekend’s massacre at a gay nightclub in Orlando.

That kind of reach is extremely difficult to replicate in an increasingly crowded digital world. “We continue to believe that Twitter remains a platform with massive opportunity,” said Ken Sena, managing director and consumer inter net analyst at Evercore.

Mark Mahaney, technology analyst at RBC Capital Markets, agreed: “They’ve got a great brand, a large platform and a unique value proposition.”

A megadeal with a much bigger partner would give Twitter “scale,” which is becoming all-important in a Silicon Valley now dominated by a handful of tech giants.

As the LinkedIn chief executive, Jeff Weiner, put it in his memo to employees explaining the deal, “Imagine a world where we’re no longer looking up at tech titans such as Apple, Google, Microsoft, Amazon and Facebook and wondering what it would be like to operate at their extraordinary scale — because we’re one of them. NYT