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Twitter faces uncertainty as rumored sale stalls

Twitter Inc. has reportedly fallen off the auction block for the time being, but the social media company still has potential and is likely to remain an acquisition target, analysts said.

Reports indicate the company canceled plans to meet with outside advisers Oct. 7 to assess potential offers as Alphabet Inc., Walt Disney Co., Apple Inc. and finally dropped out of the bidding. Twitter is now considering other options, including an increased focus on live video, and the divestiture of certain assets, sources familiar with the matter told Bloomberg News. However, the company's existing push toward a more robust video strategy has yet to deliver the user growth investors are seeking.

"Twitter has tried hard to fix these core problems," SNL Kagan analyst Seth Shafer said in an interview. "None [of its strategies] have been meaningful enough to drive more ad revenue or usage."

M&A chatter surrounding Twitter seems to be cyclical, and if the company cannot generate a meaningful turnaround, it is safe to assume the cycle will kick up again in due time, Shafer added.

"Assuming the reports are accurate, bidders seem to be making the calculation that the price/cost of acquiring Twitter is very high relative to the potential return and long-term value," Greg Sterling, vice president at the Local Search Association, said in an email interview.

Sterling and Shafer agreed that Twitter remains a strong brand with substantial value. "It's not as if Twitter is in the situation that Yahoo! Inc. found itself," Shafer said. Twitter's problems are relatively new, it still has levers to pull to refresh its growth curve and it is not backed into a corner where a sale is the only option, the two said. As far as social and digital advertising platforms are concerned, Twitter may be the only substantial player still available for sale.

"It's not as if Twitter is at death's door and must complete a sale at all cost and at whatever price," Shafer said.

Twitter's market cap declined 16.7% in the week ending Oct. 7 and fell another 11.5% in trading on Oct. 10. If its strategies don't work, Shafer said, the multiple on the company could compress to a more attractive level, and the rumor cycle could kick up all over again.

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