Twitter Inc is expected to fall into irrelevancy soon enough. However, falling online platforms, even those soaring to success, have a knack for being snatched up by other firms. Much like Microsoft’s expensive interest in LinkedIn, Google’s parent entity — Alphabet Inc — has been pegged as the most likely company to pay way too much for Twitter.
But Wall Street seems fed up with the recent trend of overpriced buyouts. As a word of caution, analysts advise that Alphabet should pay no more than $1.1 billion for Twitter Inc.
Experts fed up with corporate wasting
The company that gave us the Windows operating system now wants to adopt LinkedIn. It is a professional social network and a bit like a career-orientated Facebook. The rounded $20 billion offer it will get from Microsoft is about $153 per share more that its real value though. Naturally, experts have been quite upset about whole deal.
There is a ballpark value for just about every asset and it is upsetting when an entity pays far too much for one. Worse still, from a business view, is when that purchase fails to pull in a profit. Microsoft’s adoption of Nokia’s smartphone is perhaps a perfect exampleof this. The software giant spent billions on the venture yet couldn’t manage to turn around the handset unit’s course to failure. Could Twitter be Alphabet’s equivalent of Nokia.
Twitter has a slightly long way ahead of itself before it can be recognized as the social media site it once was. That being said, it is in fact making steady progress towards a recovery. The micro-blogging site is up 17 percent since Microsoft made news of its $20 interest in LinkedIn.
Would Twitter be worth it?
A friendly word of caution has been extended by analysts. According to Forbes, “Even in the most optimistic scenario for future cash flows, Alphabet should pay no more than $1.1 billion, or $1.55/share, for Twitter, which is 91% below the current price”
It’s hard to figure out what Twitter could offer Alphabet. Despite more than $2 billion in revenue growth over the last 4 years, the site’s year to-date has been mostly negative with -$812 million in economic earnings. Bearing this, the platform stands as a bit of a fixer upper. Alphabet Inc should consider the likely return it is to derive from Twitter. Again, Forbes speaks of synergy, suggesting that the two firms have to build on each other instead of stagnating. This should be reflected in the revenues.
“The combination with Alphabet would have to, rather drastically, improve the core profitability of the business and more.”
On the other hand, Alphabet Inc’s Google Plus platform is due for major boost. It is thought that Twitter could offer Google Plus the raise in popularity it needs.