Twitter: Gets The Bird

| About: Twitter, Inc. (TWTR)


Twitter earnings are coming up.

Which could create a buying opportunity.

Notably for one potential Japanese buyer.

Potential buyers have given Twitter (NYSE:TWTR) the proverbial bird as everyone from Disney (NYSE:DIS) to Salesforce (NYSE:CRM) have abandoned the social media company. Granted, it's much more of a media company than a tech company these days - and valued at such should put TWTR trading in the teens.

Now, will things get that bad? It's possible. Jack Dorsey, TWTR CEO, isn't helping the situation. There should be a large layoff at TWTR, with Dorsey seeing the exit as well. TWTR has paid good money, upwards of 25% of revenues on stock grants, to retain talent. However, what's needed more than anything right now isn't better tech engineers, but better sales people. TWTR is hitting a wall with user growth, which is fine, assuming they can do a better job of getting more revenue from their current customers.

TWTR only has itself to blame for the botched buyout.

Activist investor Keith Meister, who runs Corvex Management and is Carl Icahn's former right-hand man, has spoken out on TWTR. Now, Meister blames it on the shareholders of potential buyers, like Salesforce . Shareholders dumped CRM stock, with it falling over 5% on the news that they were interested in buying TWTR.

Marc Benioff, CRM CEO, even said that "Our stockholders heard that we were involved in a process and they made it clear that they did not want us to buy that company. Very specifically, we had to walk away. I love the CEO and the company and I love everything about the brand, but our stockholders don't and I listen to them." In a way, this is a positive, as boards/management teams are listening to what shareholders are saying.

Softbank might just be crazy enough to pull the trigger

Japan's Softbank is on the prowl for a break into the U.S. social media market - TWTR could be that opportunity. They have the money to spend too. Now, TWTR is still big in Japan as well. Facebook (NASDAQ:FB) is pretty much the biggest social network in all parts of the world; however, in Japan, TWTR has a bigger presence. There are some 35 million TWTR users in Japan versus the 25 million FB users.

TWTR is a "valuable asset," something Meister has noted. Steve Ballmer, major TWTR shareholder, has said that Google (NASDAQ:GOOG) would be the best fit since it's integrating tweets in its search. Ballmer said TWTR is an "irreproducible asset" and "with the right time, with the right leader that thing could be really made into something great."

Softbank has tons of cash and could use all of TWTR's data. And Softbank has an interest in getting into social media, even saying that it might be interested in TWTR at the right price. At the time, TWTR shares were trading at $35 a share.

Going it alone - fire Jack and 10% of the workforce

But with no 'real' potential buyers, TWTR is left to find its own path - which is going to be hard. However, again, job cuts is the quick answer. It doesn't need the massive workforce it has, which was build to support a massive user base - versus the niche base it has.

It's spending 40% of its revenues on marketing, which is in addition to its stock grants. Not even Yahoo (NASDAQ:YHOO) spends that much on marketing - they spend just 20%. FB spends 15%. They also spend more than any other tech company on research and development. Jobs need to be cut. It takes just a core number of employees to market and position the company's data for use in behavior and shopping patterns.

Here's to hoping for a buying opportunity after earnings on Wed. Oct. 27. Ideally, I'm an owner around $13 a share. However, I'd settle for something along the lines of an announcement that TWTR is undergoing a large restructuring that includes massive job cuts.

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.