Twitter charts solo path
as Salesforce rules out takeover
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[October 15, 2016]
By Liana B. Baker and Jim Finkle
(Reuters) - Twitter Inc faces an uncertain
future after Saleforce.com Inc <CRM.N>, the last of the companies
believed to be interested in buying the troubled social network, said on
Friday that it would not make a bid.
Twitter <TWTR.N> and Chief Executive Officer Jack Dorsey may now have to
chart an independent course in the face of stagnant user growth, heavy
losses and mounting competition from the likes of Facebook's <FB.O>
Instagram and Snap Inc's Snapchat.
Dorsey is likely to face intense scrutiny over his continued role as CEO
of both Twitter and the payment company Square <SQ.N>, especially if the
company's next quarterly report in late October is as weak as some
Twitter grew rapidly for years after it was founded in 2006, and has
assumed a unique and influential position in the global media ecosystem.
But the company has been plagued by management turmoil since its
earliest days and has long been criticized for a lack of product
innovation and, more recently, lack of user growth.
Twitter last month hired bankers to field acquisition offers and
companies including Alphabet <GOOGL.O> and Disney <DIS.N> expressed
interest, according to sources familiar with the process. Google and
Disney decided not to proceed, the sources said, leaving Salesforce, a
provider of cloud computing software for businesses, as the last
But Salesforce investors reacted poorly to the idea, sending the
company's stock down when its interest in Twitter first emerged.
Salesforce Chief Executive Marc Benioff said on Friday he had ruled out
"In this case we've walked away. It wasn't the right fit for us,"
Benioff told the Financial Times in an interview, saying there were many
reasons the fit was not right, including price and the culture of the
A spokeswoman for Salesforce confirmed the comments. Twitter declined to
Twitter's shares closed 5 percent lower Friday at $16.88, while those of
Salesforce rose 5 percent to $74.27.
Twitter had planned to wrap up any sale discussions by the time it
reports earnings at the end of October, sources told Reuters earlier
It is still possible that other bidders could emerge, according to
people familiar with the matter. One source said the company may
consider possible strategic investments rather than a buyout.
With a market cap of about $12 billion and losses running at about $400
million a year, Twitter was likely judged too expensive by prospective
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People holding mobile phones are silhouetted against a backdrop
projected with the Twitter logo in this illustration picture taken
in Warsaw September 27, 2013. REUTERS/Kacper
As an independent company, Twitter will likely need to address its unusual
leadership situation, analysts said. Dorsey has split his time between Twitter
and Square <SQ.N> since he returned as Twitter's permanent CEO about a year ago.
Investors are likely to pressure the company to appoint a “full-time” chief
executive, said SunTrust Robinson Humphrey analyst Robert Peck.
"The most common question we receive from investors is given the struggling
turnaround, doesn't the company need a full-time CEO?" Peck said.
Dorsey sent a memo to employees earlier this month calling the company "the
people's news network," and rallying them to "deliver a better Twitter faster."
Twitter enjoyed a period of explosive growth in both users and revenues after
its founding a decade ago, but growth has stalled over the past several years.
The company missed Wall Street's sales expectations in both the first and second
quarters of 2016, according to Thomson Reuters StarMine, and has yet to produce
a net profit in 11 quarters as a public company. It will report third quarter
results Oct. 27, which SunTrust analyst Peck said he expects to be weak with
data showing monthly active users flat or down.
To be sure, Twitter has become a focal point in the U.S. presidential election.
Many stories have unfolded on its service and comments made by the candidates
have made big news themselves. No media company has a mobile product with as
much reach as Twitter, BTIG analyst Rich Greenfield said.
Twitter has recently signed deals with a number of media companies and sports
organizations to stream major events such as the presidential debates and
Thursday Night National Football League games.
(Reporting by Liana B. Baker in San Francisco and Jim Finkle in Boston;
Additional reporting Rishika Sadam in Bengaluru; Editing by Jonathan Weber and
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