Market Overview

Google to Acquire Twitter?

The search engine giant is one of many names being tossed around in the quest for Twitter's acquisition.

Yahoo! (NASDAQ: YHOO), Microsoft (NASDAQ: MSFT) and News Corp. (NASDAQ: NWSA) are among the companies that are believed to be looking at Twitter, a company that is often criticized for failing to come up with a profitable business model. But a lack of profitability did not stop Facebook (NASDAQ: FB) from acquiring Instagram for $1 billion, and few believe that it will stop Twitter from being snatched up.

Historically, the best acquisitions do not involve companies that could be profitable, they involve companies that are already making money. But just as YouTube fell into Google's (NASDAQ: GOOG) hands as a streaming video infant with only hopes and dreams in its eyes, Twitter would do the same for its buyer. The only difference is that it would provide its new owner with the potential to monetize several hundred million users from day one. That -- and the breathtaking potential to milk the analytics -- is more than enough of a reason to inspire the world's leading tech companies to make Twitter an offer.

But which (if any) of the aforementioned corporations is most likely to gain control of the social media website? Needham analyst Kerry Rice told Benzinga that Twitter might make sense as a search play for Google, as the company could inspire users to shift its Twitter searching needs to Google.com (or integrate Google search into Twitter -- or both). Rice said that he has no idea if this buyout will actually occur, but it seems to be the one that makes the most sense.

Aaron Kessler of Raymond James has a similar viewpoint, though he believes that the company already pays Twitter to search tweets. Kessler thinks that it would make the most sense for Google to incorporate Twitter into Google+ to expand its social media participation. But as with the previous analyst, Kessler isn't sure that this deal will actually happen.

What about the other firms that may or may not be looking to acquire Twitter?

Macquarie analyst Ben Schachter told Benzinga that there is no way Yahoo! (NASDAQ: YHOO) could afford to buy it. For the company to pull off an acquisition of this magnitude, Yahoo! would have to perform some creative financing with Asian assets, Schachter said.

Wedge Partners analyst Martin Pyykkonen has a different take on the matter, saying that while Yahoo! could theoretically acquire Twitter, he does not think that it makes sense due to the company's broader overall strategy. Instead, Pyykkonen believes that Time Warner (NYSE: TWX) or News Corp. are more likely to buy the social media empire.

But not all analysts agree that News Corp. will invest in another social media firm.

"News Corp. got burned on the MySpace deal," an analyst (who declined to be named because the person was not authorized to speak publicly on the matter) told Benzinga this week. "[It] doesn't appear to know how to manage these Internet companies well."

Interviews by Sam Mattera. Story by Louis Bedigian.

Follow me @LouisBedigian

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