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It's time for Twitter to sell: analysis

Jon Swartz
USA TODAY
Twitter CEO Jack Dorsey says the 140-character limit is here to stay.

Marissa Mayer felt the heat, and Yahoo agreed to sell its core Internet assets to Verizon for $4.8 billion.

Your turn, Jack Dorsey.

Twitter seems to be afflicted with Yahoo-itis, a disease whose symptoms include an executive exodus, cooling revenue growth, an inability to articulate what it or its strategy is, and intense competition from Facebook, Google, Instagram and mobile upstarts such as Snapchat.

Jack Dorsey hasn't fixed the trouble with Twitter

It's time to find a buyer — and Wall Street apparently agrees.

Shares (TWTR) closed up 7% Wednesday and added another 3% Thursday on speculation about a rumored joint takeover bid by two billionaires who have been major Twitter investors: former Microsoft CEO Steve Ballmer and Saudi Prince Alwaleed bin Talal, no stranger to substantial tech investments.

The prince personally has a 4.3% stake in Twitter. He and his investment firm, Kingdom Holding, own more than 5% of Twitter.

Ballmer says he snapped up 4% of Twitter shares last year, giving him a bigger slice of the company than CEO and co-founder Dorsey, at 2%. A representative of Ballmer's could not immediately be reached for comment. (Federal law requires groups or individuals that own at least 5% of a company's shares to file  with the SEC. Buying or selling shares under that percentage does not require a filing, says John C. Coffee Jr., a business law professor at Columbia University.)

Twitter declined comment on a potential sale, a recurring topic that crops up every few months.

Chatter about interest in Twitter from a billionaire Saudi prince and the owner of the NBA's Los Angeles Clippers should come as no shocker. The tech industry is in the midst of a recent flurry of mergers and acquisitions, in which large companies flush with cash are scooping up smaller rivals specializing in emerging markets such as cloud computing and machine learning.

Shares in the social-media company have steadily risen since Microsoft inked a deal to buy LinkedIn for $26.2 billion in June. In that time, Uber agreed to sell its Chinese business to Didi, the leading ride-hailing service in China; Oracle agreed to buy NetSuite ($9.3 billion); and Salesforce agreed to buy Quip, which makes word-processing tools, for $582 million. And of course, Yahoo CEO Mayer gave way to activist shareholders who pressured the board for a sale.

Twitter is faced with slackening sales and a user growth chart that looks like a horizon in Kansas — flat, very flat — along  with continued losses. The 10-year-old company should keep its options open, including its possible sale. Indeed, the clock may be ticking on Dorsey's latest turn as Twitter CEO. His first stint as CEO ended in 2008 over complaints about his management style.

Twitter's strong underlying technology and tens of millions of fervent customers make it an attractive bauble. "It's an attractive platform to sell ads and as an analytics play," says analyst Jack Gold, principal of market researcher J. Gold Associates.

Besides the rumored Ballmer-bin Talal tandem, Gold says, several potential suitors could have a strong interest in Twitter, driving up its sales price:

Microsoft. Its Skype and LinkedIn properties could be enhanced through a live stream of information, in which Twitter excels. The micro-blogging service could also be integrated into future Windows products.

Google. It hasn’t set the Internet on fire with its social media offerings, so Twitter could be an option to glean detailed trending information on what consumers are talking about targeting ads to them.

Salesforce. It may have lost out on LinkedIn and NetSuite, but it could plunge into the streaming information sector and focus Twitter on the business market as an extension of Salesforce’s product lineup.

Amazon. The e-commerce giant may be in search of more apps to enhance its online sales and supplement cloud operations.

The list doesn’t end there. Outliers might include carriers such as Verizon and AT&T, which covet consumer content; Apple, to add to its messaging platform; and Facebook, to consolidate market share and become the de facto social media powerhouse.

“Twitter has unique value” as a media tool and source of data around breaking news — be it globally, nationally or locally, says Laura O’Shaughnessy, CEO of SocialCode, which sells digital ads on Facebook, Instagram and Pinterest using its proprietary analytics. “It has a public, newsy buzz thing that is missing from Snapchat and others.”

A takeover would seem to be the next likely chapter in the narrative for Twitter. It's one familiar to many tech companies that struggle to reach the next level of growth and eventually find themselves forced to find a buyer.

Just ask Yahoo.

Follow USA TODAY San Francisco Bureau Chief Jon Swartz @jswartz on Twitter.

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