Twilio’s dive into the customer data (CDP) business may be nearing an early conclusion. The company, known for its communications software services via APIs, expanded its offerings with the acquisition of Segment, a move that added CDP capabilities to its portfolio.
However, Twilio’s growth stalled in late 2023 and its founding CEO, Jeff Lawson, departed the company. This prompted Twilio to conduct “an extensive operational review” of Segment, which may potentially lead to a sale. The company emphasized that Segment holds strategic value, but it is approaching the review with an open mind, indicating that Segment’s future with the company is uncertain.
Twilio faced pressure from activist investors to divest assets in order to boost shareholder value. This pressure, combined with a significant drop in share price, has put the company in a position where it must consider the value of keeping Segment as part of its business.
Twilio’s History with Segment
Twilio’s acquisition of Segment for $3.2 billion in 2020 was seen as a strategic move to leverage customer data for the development of customer-centric applications. However, the market shifted, Twilio’s stock price fell, and Segment’s performance failed to meet expectations, leaving Twilio vulnerable to activist investor criticism.
With Segment’s revenue growth stagnating and concerns growing over its ability to contribute positively to Twilio’s business, the company is now considering its options regarding the future of Segment.
What is Segment Worth?
In its recent earnings report, Twilio detailed Segment’s financial performance, showing limited growth and declining revenue quality. With Segment not meeting performance expectations, the possibility of recovering the $3.2 billion investment through a sale seems uncertain.
An analysis of Segment’s growth rate and revenue suggests a value of approximately $1.4 billion, significantly lower than its acquisition cost. This lower valuation is reflective of the changing market dynamics and the challenges facing Segment’s business operations within Twilio.
Considering Twilio’s current financial standing, even if Segment were to be sold at this valuation, it may not significantly alter the company’s overall position. This dilemma leaves Twilio in a challenging position, balancing the potential strategic value of Segment against the prospect of divesting an asset at a loss.
