Is MySpace vulnerable to takeover?

The fortunes and market perception of social networking giant MySpace have changed drastically since its high-profile takeover by News Corporation. Will it be sold, will it evolve, will it fail?

By Simon Brew, 23 Aug 2007 at 13:48

gallery

Yahoo also lacks a social networking application of note, with Yahoo 360 failing to ratchet up expected numbers and lagging some distance behind its competition. What's therefore very possible is that Murdoch merges MySpace in with Yahoo, and gains a sizeable stake in the latter without having to even reach for his chequebook. After all, if you accept the argument that Facebook is on the block for $1-2 billion (and it was reported earlier this month that $6 billion was the current asking price), then the value of MySpace is, by the sheer weight of its numbers, going to be in excess of that (even factoring in the argument that MySpace has realised much of its potential already). That rules out all but the very deepest pockets.

Naturally, that points things in Microsoft's direction, although there's been little sign that that's even been considered. Not least, of course, because the various monopoly authorities would jump at the chance to block a deal that would, realistically, stand little chance of reaching completion. And when you start hunting around for other companies in the sector who could meet the multi-billion dollar price tag, you come up short.

Vulnerable?

MySpace is still vulnerable to the competition usurping it and hurting its asking price, to bring it within reach of potential buyers, and vulnerable to the whims of its owners, who may yet cash in their chips while the value is still high in the sky. Realistically, while a $5 billion-plus asking price isn't unthinkable right now, maintaining that level for the next few years - not least given the spurious economic predictions - would be some achievement.

Certainly there's no external pressure to sell, though, with no dissatisfied board of directors, no shaky share price and no impending business collapse seemingly on the horizon. But there is a very powerful owner, and a very ambitious one. And there's a very real chance that his ambitions for his company's future are intrinsically linked to the future ownership of MySpace. Thus, while a transaction remains unlikely, few would completely rule it out.