Analysts Size Up Potential Google/Twitter Deal–And Don’t Agree

Speculation that Google (NSDQ: GOOG) is in talks to buy two-year-old micro-blogger Twitter was rampant last week following a TechCrunch report that the two companies were in late-stage discussions. Some reports since then have thrown cold water on the likelihood of that happening.Kara Swisher cites sources close to the companies saying Google and Twitter have been discussing a product partnership for some time. She says that while such talks often lead to acquisition discussions, an imminent acquisition of Twitter by Google is very unlikely.

Just in case it does happen at some point, two analysts this morning came out with their assessment of the deal — and each has come to different conclusion about whether it would be good for Google.

— Susquehanna Financial’s Marianne Wolk says it would be a positive for Google for the following reasons: it needs to generate a return on the cash it currently holds (about $16 billion); it has had limited success with theacquisition of Twitter competitor Jaiku (it essentially closed the service earlier this year); Twitter searches offer an additional revenue stream to Google; and Google’s experience and expertise with search could improve Twitter’s products in ways the current management team may not have conceived.

— Merrill Lynch’s Justin Post, while acknowledging the potential of real-time search to reach a large audience, countered that the lack of a clear monetization strategy for Twitter’s shorter, less commercial searches and blogs combined with a distaste for social networks among advertisers in general would make an acquisition of Twitter by Google a poor decision that could hurt the Google stock.

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