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With Facebook Tripling, Twitter Licks It’s Wounds

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google buys twitter

Should Google Buy Twitter?

With Facebook Tripling, Twitter Licks It’s Wounds.

We’ve seen FB’s stock go from $30 to $110 and Twitter’s tumble from $70 to $16 since the social media giants went public.

With Twitter losing $521 Million dollars last year, you can see why…

Now Twitter may have a great way to help search engine giant Google expand growth.

Oddly enough cash-crunched Twitter could help Google’s search results and help them become relevant again in the social media world. Remember Google Plus?

Here’s an entire breakdown of the proposed deal.

Summary

Capital Market Laboratories suggests Google could be preparing to buy Twitter.

Twitter’s market cap is around $9 billion ex-cash.

Google integration could make this deal a winner.

Earlier this week, I read an interesting article that suggested Googlegoogle buy twitter (NASDAQ:GOOG) could be preparing to buy Twitter (NYSE:TWTR). While I have had mixed feelings on a potential deal in the past, suddenly it doesn’t seem so crazy. Google could certainly use Twitter to jump into social, while Twitter can save some face by getting shareholders out at a much higher than current price.

global digital snapshot google buy twitter

Source: “we are social” in article linked above

The above-linked article discusses multiple strategic initiatives over the past year between Google and Twitter, focusing on user and advertiser improvements. This will allow Twitter to be more successful on the advertising front, while Google gets its foot in a market projected to have almost 2.5 billion users by 2018. Google needs to look more to the future. Social is the one area where Google can improve (see Google Plus), so why not buy one of the established businesses in the space? It’s probably a better idea than trying to build your own platform from scratch, or trying to make a smaller name work and then fail, like Yahoo (NASDAQ:YHOO) did with Tumblr.

Perhaps the most interesting aspect of a deal would be in regards to Periscope. Twitter CEO Jack Dorsey discussed on the Q4 conference call trying to scale the service, while Google has an established video platform already in YouTube. While Twitter monthly active users have hit a speed bump, Periscope users continue to soar. Given the growth in the live video platform, you could make a case that Periscope itself could be worth in the billions over the next couple of years.

Financially, this makes sense on a number of fronts. First, Google has been looking to make acquisitions in the past, and the company has plenty of cash to do so. Twitter closed Tuesday with a market cap of just over $11 billion, which comes down to about $9 billion when you exclude cash/debt on hand. A purchase price of $15 billion would only take up about half of the US cash Google reported in its 10-K filing. The company might even decide to use some debt given historically low interest rates.

In terms of growth, the much smaller Twitter is obviously growing much faster currently. Twitter’s revenue growth this year is projected to be more than double that of Google. For those that would worry about Google’s revenue growth slowing towards the high-single digits or low-double digits in the next couple of years, Twitter would help alleviate those fears.

[buffet_recommended]

The deal would fit perfectly into Google’s reporting structure as well. Everyone focuses on Google’s non-GAAP earnings per share, which exclude items like stock-based compensation. While Twitter reported a GAAP loss of more than $521 million last year, stock-based compensation was more than $682 million. Twitter’s non-GAAP net income was actually a positive $276 million according to its Q4 investor letter. As I’ve detailed in the past, Google’s GAAP numbers have not shown a lot of progress in recent years, and this deal would continue that trend. However, since everyone is mostly focusing on the non-GAAP numbers, Twitter’s addition to both revenues and non-GAAP EPS would actually help the situation.

On the other hand, a deal makes sense for Twitter. If Google offers roughly $25 a share (the $15 billion ex-cash discussed above), Twitter shareholders could sell at a price not seen since December. Additionally, most Street targets say the stock is only worth about $20 currently, so Twitter gets a good deal. Finally, Jack Dorsey could go back to running Square (NYSE:SQ) on a full-time basis, rather than have his time split between two companies.

With Twitter shares trading in the mid-teens, perhaps it is time to explore the option of a sale. Google has the cash to make this happen and could certainly use a major boost in the social media space. The Twitter segment would do a lot better, thanks to Google’s advertising prowess, and Twitter shareholders could get out at a decent price. Financially, the deal would help Google on the top and bottom line, especially since most of Twitter’s GAAP losses would be excluded in non-GAAP results.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Investors are always reminded that before making any investment, you should do your own proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. Any material in this article should be considered general information, and not relied on as a formal investment recommendation.

Source: http://seekingalpha.com/article/3958760-will-google-buy-twitter

Should Google Buy Twitter?

So how do you think investors for both Twitter and Google will react. Obviously Twitter shareholders will be “peachy” to get out at $25, but what to Google shareholders think?

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Bankruptcy

Kenmore Deal a Short Term Solution for Sears… Simply Delaying the Inevitable

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Sears is one of the most iconic retailers in U.S. history. The company started the mail order catalog in 1888, and grew its brand of department stores from there as it became one of the driving forces behind malls. But lately, times have been tough for Sears. The once proud retail giant has shuttered Sears and KMart stores left and right as it tries to avoid bankruptcy. Now the company is doing something it’s never done before, turning to online distribution to turn things around. But is it too little too late?

Can the Deal Sears Struck with Amazon Right the Ship?

While Sears has been struggling to adapt to modern day retail trends, the company has been bailed out on several occasions by cash injections from CEO Eddie Lampert, who has given personal loans as well as investments from a hedge fund he manages. However, a cash injection isn’t enough if nothing is changing. So Sears is working to change. The next step? Selling its proprietary Kenmore brand through Amazon.

While the deal makes a ton of sense for Amazon, it’s a desperation play by Sears. Amazon gets to offer a leading brand on a pretty exclusive basis. Other than Sears itself, consumers won’t have any other options to purchase a Kenmore appliance. As the world’s leading online retailer, getting a leading brand no one else has just adds fuel to the fire. Smart play by Amazon. But for Sears?

Sears might see a small bump in sales from this deal, but the truth is, those sales won’t be enough to offset the trend of declining sales Sears has been experiencing for years now. Unless Sears has a bigger picture plan for expanding distribution of its products and brands, this changes nothing for the struggling retailer. That’s best case scenario. Worst case scenario? People who were willing to go to Sears specifically for its Kenmore brands now have one less reason to visit the store, or even the online store.

Clearly Sears is struggling. But they do have some valuable name brands. The best of those was Black & Decker, which sold this year for $900 million, down from the original $2.2 billion that was being considered. With Kenmore being another leading brand name, why isn’t Sears trying to sell the Kenmore brand? Most likely, no one wants it. Which is just another in a growing list of bad signs for Sears.

Watch this video from iBankCoin.com about the Amazon Sears Agreement to sell appliances online:

Ignore the hype around the deal. Expect shares of Sears Holding Corp. (SHLD) to continue DOWN.

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PayPal and Visa’s Debit Card Partnership a Win for Everyone

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In the world of finance, companies tend to work against each other rather than together. But that’s exactly what rivals PayPal and Visa are doing. Given that the two companies have such different models, does it really make sense to start merging practices and creating more competition? What can traders expect from this deal? Is Visa getting the short end of the stick?

What Benefits will PayPal and Visa Get From this Deal?

While they might be very different companies, PayPal and Visa have a lot of common ground. Both companies are in the customer payment space. But where PayPal has always been a digital payment solution for businesses and consumers alike, Visa has always been a physical, card in hand, retail banking solution. Now the two companies are working together to offer PayPal debit cards through Visa in Europe. While it’s clearly a good idea for PayPal, what’s Visa’s plan here?

PayPal users will be able to “Tap to Pay” in brick and mortar shops throughout Europe through Visa’s contactless payments infrastructure. And in return, Visa customers get more, easier access to PayPal’s system.

And that’s a big thing. Until now, PayPal has been extremely protective of its ecosystem, particularly in regards to competition. PayPal has always made it easier to pay with a PayPal balance than to access a Visa card or bank account balance. Now, that won’t be an issue. And PayPal can even suggest Visa as a first option on invoices sent through its system. For granting that access to Visa, PayPal will some some financial incentives from Visa, which means more revenue and profits.

PayPal | PayPal and Visa's Debit Card Partnership a Win for Everyone

According to PayPal’s press release, its users can now pay with their PayPal balance anywhere Visa is accepted — worldwide. Other benefits include beefing up digital collaboration for greater payments security and providing faster, easier access to funds, as well as increasing customer choice.

Currently, there are no plans to release physical debit cards, but a plan is being developed.
PayPal also currently partners with MasterCard in other countries. PayPal also currently owns BrainTree, which owns social payment network Venmo. Throw in the new partnership with Visa, and these are all positive signs for a company that’s come under fire for being stagnant regarding innovation.

What is PayPal? Watch this video from PayPal to know more:

Both Visa, Inc. (V), and PayPal Holdings, Inc. (PYPL) are both UP on the news, and should continue to rise.

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This publication provides general information about certain subjects, and should not be construed or taken as advice (legal, financial, investment, tax, or otherwise). Do not construe or take any information in this publication as a solicitation, offer, opinion, or recommendation to buy or sell any securities, bonds, or other financial instruments or to provide any legal, financial, investment, tax, or other advice or service about the suitability or profitability of any financial instruments or investments.

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Why British American Tobacco’s $49 Billion Purchase Of Reynolds American Makes Sense… And Doesn’t

Last year, British American Tobacco made an offer to take full control of Reynolds American, Inc. On Tuesday, that offer was finalized. Was BAT wise in targeting an American tobacco company?

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Last year, British American Tobacco made an offer to take full control of Reynolds American, Inc. On Tuesday, that offer was finalized. BAT already owned 42.2 percent of Reynolds, and that offer caused shares of Reynolds to spike up about 20 percent. Since then, shares have remained level, and the finalized offer has seen shares tick up a bit more. But for the long term, was BAT wise in targeting an American tobacco company?

British American Tobacco Purchased Reynolds American for $49 Billion

The tobacco industry in America has been under fire for years. In fact, British tobacco companies have avoided American tobacco companies because of civil suits, bad publicity, and an overall growing bias against cigarettes in the U.S. So what changed for BAT to bring them stateside?

To be honest, while tobacco catches flak in the states, the U.S. is still a tobacco haven. In Europe, more and more countries are not allowing companies to sell cigarettes with logos or branding. As a result, brands have a harder time attracting new customers and have seen dwindling sales numbers. In America, however, cigarette companies are protected by the First Amendment, and don’t have to face the same plain-packaging rules as overseas.

BAT already owns Pall Mall and Lucky Strike cigarettes, and will now have full control over Reynolds brands, including Camel and Newport cigarettes. The merger will also allow BAT to save roughly half a billion dollars in technology costs for next generation products such as e-cigs and vaping products.

This acquisition creates the world’s largest listed tobacco company by revenue and market value, and gives BAT full control over a foothold into the U.S.tobacco market. However, is this market healthy? Currently, about 15 percent of adults over 18 smoke tobacco. But that number is down from 21 percent in 2005. There is a direct correlation between smoking and education, and smoking and poverty. The more educated an adult is, the less likely s/he is to smoke cigarettes. In fact, according to the CDC, only 7 percent of adults with a college degree smoke cigarettes, while 34 percent of adults with a GED smoke. And 26 percent of adults below the poverty line smoke. With a surging dollar and the U.S. economy on the rise, could BAT’s new market be shrinking?

Watch the news report from Zero One for the details on this merger:

With more tobacco taxes and regulations on the way in the U.S., BAT’s purchase could take a hit. But for now, the move makes a lot of sense and offers the company a new revenue stream to explore.

Shares of British American Tobacco plc (BTI) and Reynolds American, Inc. (RAI) are both up slightly on the news. Expect that to continue in the short term, but fall back down sooner rather than later.

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