Disney (DIS) Stock Down, Nomura: Twitter Deal Has Limited Value

Last week, it emerged San Francisco-based cloud computing company Salesforce was exploring a deal, while YouTube parent Google has also been linked. This BAMtech has been tapped by Disney to build and distribute a new ESPN-branded, multi-sport subscription streaming service that will be sold directly to consumers.

Besides Microsoft, Walt Disney, where Twitter‘s current CEO, Jack Dorsey, is a board member is also in talks with social network site members. What’s different is that, perhaps for the first time, the pieces are aligning to make a Twitter sale easier to imagine. Alphabet’s division Google has often been rumored as a potential buyer of Twitter. Also, the deal, if consummated, could also be as much about acquiring a talent pool in Silicon Valley, which can be pivoted over time towards video delivery.

An acquisition seems inevitable and the recent news of interest from Google and Salesforce came as no surprise, and in fact helped push Twitter’s share price up 21 per cent in mid-day trading on Friday. Disney, if it decides to make a bid, would be able to help the company further its video-streaming media strategy. Twitter could benefit from Disney’s association with television networks.

While some investors were left scratching their heads as the social media giant entered the broadcasting business, Twitter defended its investments brilliantly.

Citigroup, which downgraded Twitter, reportedly believes it is “difficult to see the rationale behind a Twitter acquisition at these levels given the company’s stagnant user growth, deteriorating financials and elevated valuation”.

“Dorsey would have to recuse himself from all discussions since he’s in possession of confidential information of both” Twitter and Disney, Jackson said in a telephone interview.

With Salesforce.com, Twitter might turn its focus to customer service communications and mine its database of tweets for business intelligence. In 2006 Disney dropped $7.4 billion for Pixar Animation Studios. It’s the kind of frenzy that preceded the Yahoo buyout, and with Twitter’s stock getting a sizable bounce this week, it’s hard not to think people in the know are preparing for something big to happen soon. But even at that nadir, when Twitter’s value was around $12 billion, the stock was still seen as too pricey. A Twitter-Disney combo is intriguing.