Congratulations to Twitter Inc (NYSE:TWTR) shareholders, who saw TWTR stock jump 7% on Wednesday on the heels of a rumor that former Microsoft Corporation (NASDAQ:MSFT) CEO Steve Ballmer may be interested in acquiring the microblogging platform.
The idea was quickly quelled by plenty of in-the-know people (though interestingly, none of them were Ballmer).
These people pointed out that Twitter’s current board may not be interested in selling. At least, not at this stage of the turnaround.
Surely, Twitter CEO Jack Dorsey deserves a little more time before pulling the plug on a project, and even if the board was frustrated into submission, it doesn’t inherently mean Ballmer and Saudi investor/Prince Alwaleed Bin-Talal are ready to cough up $10 billion-plus to buy up the entire TWTR float.
And yet, the idea isn’t as crazy as it sounds.
Steve Ballmer, Loved or Hated
The former Microsoft chief is revered by some and loathed by others; the in-between crowd is sparse. Many believe he drove Microsoft into the ground when he was at the helm from 2000 to 2014 — even though annual sales ramped up from $22.9 billion to $86.8 billion during that time. Ballmer not only didn’t innovate, even operating systems — the company’s bread and butter — seemed to be a recurring headache under his leadership.
One thing Ballmer did do well, however, is find the obscure (maybe even bizarre) stuff and turn it into something at least indirectly monetizable.
Skype is a fair example.
Back in 2011, Skype was a well-known and curious internet-based audio/video chat solution, though small potatoes for the software giant. The telco-tech company was generating less than $1 billion in revenue, and posting small GAAP losses. Ballmer spent $8.5 billion on it anyway, garnering eight million paying customers in the process.
Though Ballmer left it behind when he stepped down from the CEO role in 2014, he did plant some interesting seeds with Skype despite plenty of criticism for the price he paid for it. Those seeds are just now sprouting, as Microsoft has begun a very simplified integration of the telephone service with its office-productivity suite, Microsoft Office.
It’s been slow moving primarily because Ballmer and Microsoft CEO Satya Nadella didn’t want to break Skype by changing too much, too fast. Along the way, the company learned businesses loved it even if consumers could take it or leave it.
That was ultimately Ballmer’s design though… don’t rush things and end up breaking them [like Yahoo! Inc. (NASDAQ:YHOO) did with Tumblr].
Another Ballmer deal, Yammer, has also gotten traction within the office-productivity circle, bolstering the perceived value of Office 365 and other pieces of software… an internal-oriented corporate social platform that makes the acquisition of external-oriented professional networking outfit LinkedIn Corp (NYSE:LNKD) all the more interesting.
Point being, Steve Ballmer may be more visionary than he gets credit for, even if he’s passive.
But a Twitter Buyout?
Still, would Twitter be better off with Ballmer pulling the strings — if not in charge — rather than Jack Dorsey? Don’t rule the idea out.
Not that TWTR investors don’t have a right to expect more fiscal success from the company than they’ve seen so far (TWTR stock has been publicly traded since 2013, while the microblogging platform has been around since 2006), there’s no denying that frustrated investors have set the tone that’s been guiding the stock — fair or not.
It’s just one of the perils of a publicly traded company: Investors want success here and now, even if the “here and now” isn’t good for the company in the long haul. Privatized, Twitter may have a shot at success by virtue of toughing out a couple rebuilding quarters and coming back with a bigger and better product.
It’s a premise somewhat applicable to all publicly traded companies, but more than a few missteps from Twitter have made the idea especially likely for Twitter.
And it’s been done before, recently. For instance, Dell is much better off after going private; able to call its own shots, rather than be pushed around by shareholders who may or may not know everything they think they know about the PC business. As Michael Dell said earlier this year, two years after taking his namesake company private:
“We find ourselves in a world increasingly afflicted with myopia-governments that can’t see beyond the next election, an education system that can’t see beyond the next round of standardised tests, and public financial markets that can’t see beyond the next trade. This was what Dell faced as a public company. Shareholders increasingly demanded short-term results to drive returns; innovation and investment too often suffered as a result. Shareholder and customer interests decoupled.”
Could Ballmer say something similar of Twitter in the foreseeable future?
Bottom Line for TWTR
None of this is to say Ballmer and Alwaleed Bin-Talal are going to acquire Twitter, now or later. It is to say, however, stranger things have happened, and Ballmer may have a better shot at doing something with the company than most realize.
Though the odds-makers say the board isn’t interested ether way, putting a pile of cash on the table can change minds rather quickly. Nobody knows for sure if Twitter’s turnaround effort is actually going to work, and such a deal would be an easy, semi-fruitful “out” for TWTR owners.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
