Monday Grok: Apple considers strategic investment in Twitter

Meanwhile at Groupon, more things change

News that Apple is considering buying its way back into the social media game with a strategic investment in Twitter has got the wires hopping over the weekend. While Apple’s stunning success with personal technology such as its iPhones and iPads has made it one of the biggest companies in the world, it has struggled in the social networking space.

But its $116 billion+ and growing cash stockpile means it has the flexibility and the firepower to turn that around quickly should it so desire. For instance, it could swallow Facebook whole (assuming if Zuckerberg is willing to sell) and at Facebook’s roughly $50 billion market cap could still have almost $70 billion cash on hand — about as much as it held a year ago. BTW, Grok is not suggesting that would be a smart idea.

The New York Times broke the story on Saturday and the WSJ followed up on Sunday. That left the tech media, often so dismissive of its "old media" forebears, scrambling to catch up.

According to NYT, “There is no guarantee that the two companies, which are not in negotiations at the moment, will come to an agreement. But the earlier talks are a sign that they may form a stronger partnership amid intensifying competition from the likes of Google and Facebook.”

The piece in NYT suggested the size of the muted investment was several hundred million dollars, and would have valued Twitter at $10 billion. NYT also suggested the discussions took place in "recent months", although there is some conjecture about that.

For its part, WSJ followed up on the NYT piece and said that the companies appear to have had discussions a year ago but those conversations are not currently ongoing.

WSJ also noted that in the intervening period the dynamics of the market had changed a little. “Last month, Facebook and Apple announced an agreement to wrap the social network into the iPhone's main software for the first time.”

Business Insider wrote, “Apple has not done anything particularly well in the "social" realm. It seems to be leaving that to Twitter. Perhaps a year ago, when Apple started working with Twitter, it considered making an investment to protect Twitter from being bought by Google or another rival who wouldn't work with Apple.”

Twitter is in no particular rush to make a deal it seems, and is under no particular pressure to do so either. The company is believed to have access to about $600 million from earlier equity raisings and the success of its growing advertising revenues.

Just another Groupon moment

Groupon, the daily deals pioneer, has been having a hard time lately; its stock has been tanking, dropping as low as $6.50 just yesterday, after the early flush of its IPO last year when it spiked to $31 on its first day. The interesting thing, as we have noted before, is that there has been no particular news flow driving the selloff.

Today, however, it surged 14 per cent to finish at $7.60, and indeed it broke through the $8 barrier at one point. But again there’s nothing in the news cycle to suggest why. It’s worth noting that the volumes today were three times the average of the last 50 days. Peculiarer and perculiarer, as they say in the classics.

Indeed, the only story of significance we can find about Groupon in the last 48 hours is this one: A guest column in Venture Beat , which suggested that once again Groupon has been playing fast and loose with its revenue figures. The site claimed Groupon inflated its first quarter revenues by 5 to 8 per cent due to the way it handles revenue recognition for its Groupon Goods liquidation business.

Most damning, the author quoted "unnamed sources", saying the head of Google Good would wax poetic about how he “will get around anything the SEC has to say.” Groupon attacked the report, telling the author, “You are so far off base you risk ridicule.”

Andrew Birmingham is the CEO of Silicon Gully Investments. Follow him on Twitter @ag_birmingham.

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