Twitter initiates talks with tech companies over sale: source

[September 24, 2016]  By Greg Roumeliotis and Liana B. Baker

(Reuters) - Twitter Inc <TWTR.N> has initiated talks with several technology companies to explore selling itself, a person familiar with the matter said on Friday, signaling the start of what is likely to be a slow-rolling auction of the high-profile but money-losing social media company.

A sale of Twitter has been the subject of on-again, off-again rumors for many months as the company grapples with stagnant user growth, soft advertising sales and losses running at hundreds of millions of dollars a year.

The company's business struggles have come even as the 10-year-old service has evolved into a potent global source of news, entertainment and social commentary.

CNBC, citing anonymous sources, reported on Friday that Twitter is in talks with companies including Google <GOOGL.O> and may receive a formal bid soon. A source told Reuters that Salesforce.com <CRM.N> is also in pursuit.

Twitter and Alphabet Inc, Google's parent company did not respond to a request for comment. Salesforce declined to comment.

Verizon, another company mentioned in media reports on Friday as a possible suitor, said it did not comment on M&A rumors but that it had not submitted a bid for the company.

Twitter shares jumped more than 19 percent to $22.22 per share on Friday, marking the largest one-day rise since their first day of trading in 2013. The company now has a market value of around $16 billion.

Morningstar analyst Ali Mogharabi said Alphabet would be the best acquirer for Twitter since it has not yet been able to crack social media on its own despite several efforts.

"From a strategic standpoint, we think it would be more beneficial for Alphabet as opposed to Salesforce," Mogharabi said. Former Google executive Omid Kordestani is executive chairman of Twitter.

Morningstar estimates Twitter could be bought for $22 per share. Twitter is working with investment banks Goldman Sachs and Allen & Co in considering possible transactions, sources familiar with the situation said.

SALESFORCE SURPRISE

The most unexpected development on Friday was Salesforce.com's interest in acquiring Twitter. Salesforce serves business customers with cloud-based computing services and has virtually no presence in consumer media.

But a recent presentation about its new "Einstein" artificial intelligence platform provided a peak at how Twitter could fit into the company's strategy .

Salesforce executives said they license the Twitter "firehose" of all Tweets that come through the platform, and use it to power sentiment analysis and other tools that show how companies and brands are being discussed and perceived.

Salesforce Chief Executive Marc Benioff is active in political causes in San Francisco and the two companies are located just blocks from each other in the city.

Salesforce's chief digital evangelist, Vala Afshar, tweeted on Friday: "Why @twitter? 1 personal learning network 2 the best realtime, context rich news 3 democratize intelligence 4 great place to promote others."

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 Pempel/Illustration/File Photo

Later, Afshar added: "I have tweeted my personal views regarding 'Why Twitter?' numerous times over the past couple of years. I simply love Twitter."

RIVALS ASCEND

Afshar's sentiment is not shared on Wall Street, however. Twitter 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.

As of the end of the second quarter, the company had an accumulated loss of nearly $2.3 billion since its inception.

It has also failed to keep pace with rivals, notably Facebook's Instagram and Snapchat. Both now boast more users than Twitter by most measures even though they are much newer, and advertisers have begun to migrate their ad dollars accordingly.

Twitter's revenue grew rapidly under former Chief Executive Dick Costolo, but stagnant user growth and mounting complaints about lack of innovation in the product led to Costolo's departure last year.

The company has also faced criticism for its failure to stem abuse on the platform and for missing the opportunity to play a bigger role in the red-hot messaging arena. Twitter has 313 million monthly users, up just 3 percent from a year ago.

Co-founder Jack Dorsey returned to the company as chief executive in 2015 while retaining his role as CEO of payment company Square, and his plan for reviving Twitter is at best seen as unfinished. Recent moves to be a big player in live video, including a deal to broadcast NFL games, are too new to be reflected in user growth or ad sales.

Twitter went public in November 2013 at $26 a share. The shares peaked above $74 just over a month after its IPO, but have been on steady downward trajectory since. From then through Thursday's close at $18.63, the stock had lost three-quarters of its value.

(Reporting By Liana B. Baker, Dan Burns, Greg Roumeliotis and Sinead Carew; Writing by Jonathan Weber; Editing by Meredith Mazzilli)

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