This Could Be Alphabet Inc’s Next Target
Alphabet Inc (NASDAQ:GOOG), which my friends prefer to call Google, has lost about 5.6% year-to-date. That’s quite a bit considering the entry price for admission to Google stock is in the range of $700.00 per share. But, while the company is working on a number of projects, not the least of which is one of the most advanced driverless technology platforms, it needs something special to draw attention from investors.
Google stock, while down this year, has actually been trading in its highest range ever. If it is in the doldrums it’s only because just before the end of 2015, it closed at an all-time record-high of $776.60 per share. Yesterday, Microsoft Corporation (NASDAQ:MSFT), which is encroaching ever more on Google’s business space, announced it was buying LinkedIn Corp (NYSE:LNKD) for more than $26.0 billion. That is certainly a lot of money for a site full of unemployed people searching for “new challenges.”
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Indeed, Microsoft’s LinkedIn shopping spree will put more pressure on Google stock in the coming weeks. Google must do something to win back some attention. It needs a high-profile target that’s trading at a low price, which still guarantees Silicon Valley street cred. Twitter Inc (NYSE:TWTR) presents the ideal opportunity.
Google would be smart to acquire Twitter; there have been rumors circulating about this very possibility. For starters, the market has long sensed that Twitter stock could resolve its woes through a major acquisition. Not surprisingly, Twitter stock rose as much as eight percent on June 13 simply on the hope generated by Microsoft’s purchase of LinkedIn that Twitter could be next. In the summer of 2015, there were rumors that Google and Twitter even held discussions about an acquisition, which then failed due to concerns of breaching antitrust rules. (Source: “Google buying Twitter would be like Microsoft buying Yahoo,” Business Insider, April 7, 2015.)
But the fact that Microsoft has taken LinkedIn has revived the Google-Twitter chatter. Google would promptly gain a major social media foothold. Indeed, Google’s current community or social media platform, “Google+,” has failed to make any dent in Facebook’s arrogant domination of the social media space. Twitter could also be quite interesting in the development of its information service (“Google News”), leveraging trends in real time. It would make tweeting news even easier.
The question is whether Google, which has significant financial resources, can agree to spend $10.0 billion, which is still an astronomical sum, to purchase Twitter. Last summer, when the rumors of a Google-Twitter coupling were building, Twitter was worth much more—as much as $33.0 billion at one point. The fact that Microsoft paid more than $26.0 billion for LinkedIn makes Twitter, whose synergies with Google are easier to perceive, a bargain.
Moreover, in 2010, the American press spoke of contacts between the two companies. Google offered some $4.0 billion to take control of the micro-blogging site. (Source: “Here’s Why Google Needs To Buy Twitter Immediately,” Newser, September 30, 2010.) No doubt this price is historical at best, given the cultural, if not financial, impact that Twitter has enjoyed.
Twitter shareholders are certainly hopeful that Google can come to their rescue. Just a few weeks ago, “Snapchat” said it had 150 million users, which is 10 million more than Twitter has. This has put the latter at a disadvantage in fighting to stem the stagnation in user growth despite new features and various attempts to improve the site that have so far fallen flat.
Meanwhile, the fact that Verizon could soon be acquiring Yahoo’s main Internet properties to enhance and complement its AOL assets also puts pressure on Google to make a move for Twitter. It simply needs to acquire a major social media brand in order to compete with the various players snapping up the popular tech stocks that are trading at record-lows. If Google doesn’t buy Twitter, another company like Apple Inc. will. At its current price, Twitter is a bargain that Google should remove from the market, if only to make sure no other company gets ahold of such a powerful social media tool.
Let’s put it this way: if Google doesn’t buy Twitter, Sundar Pichai, Google’s CEO, will not snooze well for the next foreseeable afternoons to come.