Our Take On The Recent Layoffs And Management Changes At Twitter
Twitter (NYSE:TWTR) has created a lot of news recently amidst its ongoing efforts to reinvigorate growth. This week was no different and saw the layoff of about 8% of the company’s workforce, along with the appointment of a key Google executive to the role of Chairman. We believe both these developments could work in favor of the company over the long run. This is as the layoffs indicate that the new leadership can take the much-needed aggressive and audacious measures required to fasten the pace of innovation in the company. Plus, the addition of Omid Kordestani will add valuable experience to the Twitter team, and increase the likelihood of its successful turnaround, in our view.
See our complete analysis for Twitter
Layoffs Indicate That The New Leadership Can Take Aggressive Measures
Over the last few days, soon after the appointment of Jack Dorsey as the permanent CEO, Twitter undertook a bold move in announcing layoffs of 336 employees (representing around 8% of its total workforce). The job cuts were mainly made in the engineering and product divisions. Officially, the step was taken to cut costs, and to make the engineering team more nimble and focused.
Our Take: While this move is rather unexpected from companies at the early stage of their life cycle, we think this also indicates that the new leadership is ready to take bold and aggressive measures to boost growth at the company — a welcome change from the past, in our view. Up to this point, Twitter had moved slowly in rolling out product changes and, hence, the recent changes could somewhat accelerate the pace of innovation. Moreover, with intensifying competition from the likes of Facebook and Snapchat, Twitter needs to move much more quickly to keep its long-term potential intact.
Appointment Of Omid Kordestani As The Executive Chairman Is A Positive
In another big change that was seen at Twitter lately, Omid Kordestani (previously Chief Business Officer at Google, before the company restructured into Alphabet) was appointed to the Board of Directors, in the role of executive chairman. This follows the recent appointments of Jack Dorsey and Adam Bain to the roles of Chief Executive Officer and Chief Operating Officer respectively.
Our Take: We think the appointment of a key-Google executive to the role of Chairman, will help bring direction and strengthen leadership at Twitter. We expect Omid Kordestani’s knowledge of Internet businesses, combined with Jack Dorsey’s vision and energy to be an overall positive for the company. This is as the past experience of a senior leader at Google, could come in handy for Twitter, as at it is is expected to roll out various product changes to accelerate user base growth. This will also enhance Twitter’s advertising business over the long-run, in our view.
Our $38 price estimate for Twitter’s stock is over 30% ahead of the current market price.
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