Twitter shares surge on report of Google talks

SAN FRANCISCO — Twitter shares surged 19% Friday after a CNBC report that Salesforce and Google were among companies in discussions about a possible bid for the struggling social network.

Twitter has received "expressions of interest" from a number of technology companies about whether to make a bid to acquire the company, CNBC's David Faber reported Friday. Twitter's board is “largely desirous of a deal,” said Faber, who said he had talked to people close to the situation.

Salesforce and Google are among the suitors believed to be interested in a Twitter bid, he said. No deal is imminent, but the talks are gaining momentum and could result in a deal before the end of the year, one person close to the situation told Faber.

Twitter (TWTR) shares rose 19% to $22.26 in early trading Friday, reversing late Thursday losses that suggested advertisers were backing away from the platform.

Friday's report isn't the first speculation that Twitter might be on the sale block, as user growth flattens and sales growth cools. Last month, rumors spread of a joint takeover bid by Microsoft CEO Steve Ballmer and Saudi Prince Alwaleed bin Talal, both major Twitter investors. Shares also rallied in June after Microsoft said it would buy LinkedIn.

Late Thursday, Twitter shares were down 2% in after-hours trading on the heels of an analyst warning Thursday that its value for advertisers may be "waning."

RBC Capital analyst Mark Mahaney downgraded the stock to "underperform," or a sell rating, and lowered the price target to  $14 from $17, citing a recent advertising survey with Advertising Age that found that 28% of the 1,100 advertising professionals surveyed planned to decrease their ad spend while 26% planned to "significantly" or "modestly" increase it.

"This is the weakest result we have seen and the first time we have seen a negative skew towards spending," Mahaney wrote in a research report.

Thirty percent of survey respondents do not allocate any budget to Twitter, up from 25% in February, the survey found. The percentage of those who commit between 1% and 10% of their online marketing budget to Twitter declined to 54% from 57%.

"Only 24% of respondents believe their (return on investment) has improved on the platform versus 21% who think it declined (a negative move from the 29% vs. 21% split seen earlier this year)," Mahaney wrote. "When ranked against its peers, Twitter ranked fifth of seven in terms of ROI to advertisers, behind Google, Facebook, YouTube and LinkedIn, but ahead of Yahoo and AOL."

Mahaney says the last four surveys don't offer "convincing evidence that a substantial number of advertisers will commit meaningful (dollars) to Twitter."

"Twitter believes it can command premium ad pricing, but its dramatic ad revenue deceleration doesn’t support that," he wrote. "That said, we could become more positive on Twitter if it shows meaningful traction with advertisers."