Daily Management Review

Twitter Announces Layoffs Across the Globe in Attempts of a Revival


Twitter Announces Layoffs Across the Globe in Attempts of a Revival
As co-founder Jack Dorsey readies to revive growth in the microblogging service provider's user base in his second stint as chief executive, Twitter Inc announced the lay off up to 336 employees, or about 8 percent of its workforce.
It has been just weeks that Dorsey had taken over as the permanent CEO of the company and the layoffs, planned to be conducted primarily in the company's product and engineering functions, come a week after the CEO appointment.
In the declaration in June this year, Twitter declared it had about 4,100 employees globally. The share of the company rose as much as 6 percent in morning trading on Tuesday.
"We feel strongly that engineering will move much faster with a smaller and nimbler team, while remaining the biggest percentage of our workforce. And the rest of the organization will be streamlined in parallel," Dorsey said in a letter to employees.
Experts believe that the step taken by Twitter is indicative of its attempt to focus also on "rationalizing sales" along with engineering to achieve its margin targets.
Dorsey, ever since he took over as Twitter's interim CEO in July after the resignation of Dick Costolo has been very candid about the problems that the company was facing.  
The troubles were indicative in the data revealed by the company for the second quarter that said that in terms of the growth in average monthly users, the second quarter was the slowest ever since the company went public on November 7, 2013. There has been a nearly 60% fall in the share prices of the company after the stock nearly tripled to a record high of $74.73 in December 2013.
"The general thinking is that Twitter has a product problem, which is why they picked Jack to come in. You would normally not be cutting in engineering if you have a product problem. So I scratched my head a little bit on that," FBN Securities analyst Shebly Seyrafi said.
Twitter started the service that is called "buy now" button which allows users to make purchases and a feature that highlights the best tweets and content. Both the features were added to Twitter after Dorsey took over as CEO for the second time in an attempt to draw more users.
About $10 million-$20 million in severance costs and $5 million-$15 million in restructuring charges is expected to be made by the company, it said in a communiqué. Twitter expects to record most of these pretax restructuring charges in the fourth quarter.
The planned layoffs were first reported on October 9 by technology news website Re/code.
The company also expects to clock above the higher end of its forecast range of $545 million-$560 million in its estimation of third quarter revenue for this year. The company adjusted EBITDA at or above the higher end of its forecast range of $110 million-$115 million. The third quarter results are expected to be reported by Twitter on October 27.
All these announcements resulted in a 5 percent rise in the company shares at $30.24 on the New York Stock Exchange.

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