Thursday, December 08, 2016 | Updated at 1:00 PM ET

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Twitter sale go bust: Salesforce out of the game

First Posted: Oct 18, 2016 01:21 AM EDT
Salesforce.com logo

Salesforce.com logo(Photo : Getty Images)

 

(Photo : Getty Images)

 

Twitter's hopes to finalize its sale by the end of October took a serious set-back as one of its last prospective buyers, Salesforce.com, walked away from a possible deal last Friday. Other potential buyers who had backed out earlier were Disney and Google. Twitter is valued at nearly $12 billion.

As reported by The Wall Street Journal, Salesforce Chief Executive Marc Benioff, who had previously called Twitter an "unpolished jewel", was unable to persuade its shareholders, who were concerned about a "mismatch in business models". The withdrawal of Salesforce drove Twitter shares down another 5%, to $16.88 at 4 pm on Friday.

Investors are struggling to pin a value on Twitter, as the microblogging site has the lowest user value compared to all the major social media players. According to USA Today, Twitter's users are valued at just $45.10 each, which is relatively low compared to other social networks like LinkedIn ($243 each) and Facebook ($216 each).

Analysts say Twitter's CEO Jack Dorsey needs to start serious cost-cutting or might end up selling parts of its business. SunTrust Banks Inc. analyst Bob Peck said Twitter may face a formal auction process next year or undergo serious cost cuts if the company fails to show much improvement in the fourth quarter. Other analysts say Twitter needs to improve on its user growth and profitability. As Wells Fargo analyst Peter Stabler describes it, "It's still a product challenge. The pressure on Twitter is to demonstrate they have a strategic plan to increase and drive engagement and usage."

Twitter is trying to drive its profitability up by signing deals with sports leagues and media companies to broadcast live events. Twitter announced an exclusive deal with BuzzFeed Inc. last Thursday, to stream coverage of the presidential election night on Nov. 8. It also signed a $10 million deal in April for the rights to stream Thursday night NFL games. Twitter has also offered NFL sponsorship ad packages ranging from $1 million to $8 million for the season.

With no new prospective buyers for Twitter's sale on the horizon, all eyes will be eagerly anticipating Twitter's reports on its third-quarter earnings this Oct. 27. Hopefully, there will be good news coming next for Twitter fans.

 

 

 

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