Twitter Cuts Jobs as CEO Dorsey Looks to Revive Growth
By Lehar Maan and Abhirup Roy
Twitter will lay off up to 336 employees, or about 8 percent of its workforce, as co-founder Jack Dorsey readies to revive growth in the microblogging service provider's user base in his second stint as chief executive.
The layoffs, primarily in the company's product and engineering functions, come a week after Dorsey took over as permanent CEO.
Shares of Twitter (TWTR), which had about 4,100 employees globally as of June 30, rose as much as 6 percent in morning trading Tuesday.
"We feel strongly that engineering will move much faster with a smaller and nimbler team, while remaining the biggest percentage of our workforce," Dorsey said in a letter to employees. "And the rest of the organization will be streamlined in parallel."
FBN Securities analyst Shebly Seyrafi, however, said the company needed to focus also on "rationalizing sales" along with engineering to achieve its margin targets.
%VIRTUAL-pullquote-The general thinking is that Twitter has a product problem, which is why they picked Jack to come in.%Dorsey, who took over as Twitter's interim CEO in July after Dick Costolo resigned, has been candid about the company's problems.
Twitter's second-quarter growth in average monthly users was the slowest since the company went public on Nov. 7, 2013. Its stock nearly tripled to a record high of $74.73 in December 2013, but has fallen about 60 percent since.
"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," Seyrafi told Reuters.
Since Dorsey took over as CEO for the second time, Twitter has rolled out a "buy now" button that allows users to make purchases and a feature that highlights the best tweets and content.
The company said it expected about $10 million to $20 million in severance costs and $5 million to $15 million in restructuring charges. Twitter expects to record most of these pretax restructuring charges in the fourth quarter.
Technology news website Re/code first reported the planned layoffs on Oct. 9.
Twitter also estimated its third-quarter revenue at or above the higher end of its forecast range of $545 million-$560 million, and adjusted EBITDA at or above the higher end of its forecast range of $110 million-$115 million.
The company will report its third-quarter results on Oct. 27.
-Devika Krishna Kumar contributed reporting.