Twitter moves point to a timely IPO

As speculation swirls, analysts say the micro-blogging site can avoid Facebooks IPO debacle

As rumors swirl that Twitter is gearing up for an initial public offering (IPO), industry analysts say the timing is right for such a move.

"This would be a good time for an IPO," said Patrick Moorhead, an analyst with Moor Insights & Strategy. "It's really time for Twitter to pay off their first investors, early employees, and gear up for acquisitions.

"Facebook defined what not to do in an IPO and we'll see if Twitter has learned from their mistakes," Moorhead said.

Twitter appears to be laying the groundwork for an IPO, most recently by moving executives around. Vijaya Gadde, who had managed Twitter's corporate affairs for the last two years, has replaced Alex Macgillivray as Twitter's chief lawyer, according to a report in The New York Times.

Moorhead added that if Twitter is looking ahead to an impending IPO, now is the time for the company to think about buying companies and technologies that enable it to better compete in local commerce.

Twitter may already be considering the same thing.

In June, Twitter bought Spindle, a mobile app focused on giving Facebook and Twitter users real-time, localized information about stores, restaurants, bars and entertainment venues. And last February, Twitter acquired Bluefin Labs, an advertising analytics company.

Both localization and advertising will be key ingredients to a successful IPO, said Dan Olds, an analyst with The Gabriel Consulting Group.

"If they start the process now, we'd probably see the IPO sometime in 1Q or Q2 2014," said Olds. "Barring any significant deterioration in the economy, the environment should be fine for a Twitter IPO. They real key, however, will be Twitter's fundamentals. How big is their revenue stream and how fast is it growing? What are their expenses? There are estimates out there, but an IPO filing will pull back the covers and reveal all the details."

He noted that after Facebook's lousy IPO, Twitter needs to have all of its financial and business ducks in a row.

"I think that Twitter should go public sooner rather than later," he said. "They have built up a very solid brand and became a household word. It's time to capitalize on that. They not only need to show solid financial performance and profitability today, but need to prove in investors' minds that Twitter is at the beginning of their fast growth phase, not near the end."

He added that an IPO is one of the most critical points in the life of a business. And Facebook's "IPO debacle" soured many potential investors to social networking companies .

That means Twitter will have to carefully navigate its own IPO, whenever it comes.

"A Twitter IPO is going to receive incredible scrutiny and will be constantly compared to Facebook's IPO," said Olds. "I'm sure that Twitter understands this and will make sure that they've covered all of the bases."

Twitter officials did not respond to repeated attempts for a comment about the prospect of an IPO.

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at  @sgaudin, on Google+ or subscribe to Sharon's RSS feed . Her email address is sgaudin@computerworld.com.

See more by Sharon Gaudin on Computerworld.com.

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