Twilio, a company known for its communications software services, is facing potential pressure to sell off its subsidiary, Segment, which offers customer data platform (CDP) capabilities. The company’s recent slowdown in growth and the departure of its CEO have prompted an “extensive operational review” of Segment, raising the possibility of a sale.
Key Takeaway
Twilio’s deliberation over the potential sale of Segment reflects the complexities of balancing strategic considerations and investor demands amid a challenging business environment.
The Activist Pressure
Twilio has come under scrutiny from activist investors Anson Funds and Legion Capital, who are advocating for the divestment of assets to enhance shareholder value. This pressure has intensified as Twilio’s stock price experienced a significant decline, leading to concerns about the company’s strategic direction and the value of its acquisitions.
Twilio’s History with Segment
Twilio’s acquisition of Segment in 2020 was a notable move to expand its product offerings and tap into the growing importance of customer data. However, the subsequent market shifts and Twilio’s own performance challenges have raised questions about the synergy between the two entities.
Segment’s Financial Performance
Despite being integrated into Twilio’s operations, Segment’s revenue growth has been modest, and its gross margin has faced pressure. The company’s new CEO has acknowledged that Segment is not meeting performance expectations, adding complexity to the decision-making process regarding its future within Twilio.
Assessment of Segment’s Value
Given Segment’s underperformance and the current market conditions, its potential value in a sale is a subject of debate. Analysts suggest that its growth rate and revenue base may result in a valuation significantly lower than the amount Twilio originally paid for the acquisition.
