Would Apple Screw Up Twitter on Buyout?

NEW YORK ( TheStreet) -- On Monday, I wrote an article for TheStreet explaining why rumored buyers such as Google ( GOOG) would end up screwing up Pandora ( P).

It's interesting to approach the same subject vis-a-vis the prospects of Apple ( AAPL) buying Twitter. Last month, I ventured that it made sense, but I have done some thinking since then.

These conversations come down to two primary things.

First, integration. How can the buyer seamlessly work the company it acquires into its ecosystem? If you're buying a solid brand -- Twitter and Pandora certainly qualify (in that order) -- it only makes sense to want to preserve its identity.

Second, and closely related . . . Can the buyer not only maintain, but guarantee the acquired company's autonomy?

I would think -- and hope -- these things would matter to the takeover target. I think -- and hope -- they do at Pandora and Twitter. I really don't think getting bought out is just a natural step in the progression at either company.

With that said, any buyout would have to address those two points favorably.

It's tricky. You need to integrate, but, with companies such as Twitter and Pandora, you should not do so at the expense of the long-term trajectories they're charting.

In Pandora's case, I can't see a way Google or Amazon.com ( AMZN), for that matter, could swallow Pandora whole, yet not break the company's stride. That doesn't mean there isn't a way; however, aside from complete and total autonomy, nothing sticks out as obvious.

Google could treat Pandora like it did YouTube. But, that assumes quite a bit, particularly that the search and advertising giant would throw its support behind Pandora's very different sales model and invest in it accordingly.

When looking at any M&A rumor you have to ask several questions to separate inane speculation from something with a legitimate chance of happening.

Who needs the buyout and why? Does a buyout benefit both parties equally? Or is this a lopsided relationship where one company operates from a position of weakness? And I am not speaking relatively. Of course, comparatively, Apple dwarfs Twitter, but in their spaces, both companies are quite healthy. Neither needs to seek M&A on the buyout or sellout side.

Every "this company or that company should buy Research in Motion ( RIMM)" article not only borders on pathetic, it enters the country "pathetic" without a passport. Why in the world would any company, particularly a healthy one, want to buy a disaster such as RIM?

There would have to be some real strategic-competitive value. The few patents that might matter to an Apple, Google, Amazon or Facebook ( FB) do not justify the time and money you would have to spend to get something out of a case study in complete failure like RIM.

You can't say the same about Twitter. Not even close.

There's real value there for Apple. If Apple missed anywhere under Steve Jobs, it was with social. Ping was not supposed to be a dud. I don't care what anybody says in retrospect. Given how huge social is, that was Jobs' biggest misstep at Apple.

Twitter, if integrated into the iTunes platform, represents everything Ping should have been. Unless you link iTunes to a Last.FM account, there's really no way to share what you're listening to with your friends and strangers. Every time I use iTunes, I wonder how Jobs and Apple could let it be so antisocial.

The old milk crates I used to keep my record albums in provide more social value than an iTunes music collection.

The Twitter 140-character format jibes perfectly with full-scale iTunes integration. That type of arrangement lends itself to partnership, not M&A, but in either scenario, what's in it for Twitter?

Not much.

Therefore, if Apple wants deep, customized Twitter integration in iTunes; if it wants to embed the social network in its living room plans; if it wants to meld it into the next generation of an open iMessage, it needs to buy the company.

The more I think about it -- and the more I hear Twitter CEO Dick Costolo speak -- the more I think it has about zero chance of happening unless Apple can stage the hostile takeover of the century. Not going to happen.

There's something special about Twitter's brand of independence. It's probably healthier than any of its peers who have gone public over the last 12 to 24 months. Costolo continues to build this thing out on his and his team's terms. Nobody seems to have even the slightest problem with his approach.

If Apple buys Twitter, it would render the company unrecognizable to itself. That's not good. If I'm Twitter I take a hardline stance. I wouldn't even let Apple open the door to M&A via the investment the two companies reportedly discussed.

At the time of publication, the author was long FB and P.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Rocco Pendola is a private investor with nearly 20 years experience in various forms of media, ranging from radio to print. His work has appeared in academic journals as well as dozens of online and offline publications. He uses his broad experience to help inform his coverage of the stock market, primarily in the technology, Internet and new media spaces. He has taken a long-term approach to investing, focusing on dividend-paying stocks, since he opened his first account as a teenager. Pendola, 37, is based in Santa Monica, Calif., where he lives with his wife and child.