Twitter to Cut Workforce as Revenue Growth Slows
October 27 2016 - 8:10AM
Dow Jones News
Twitter Inc. posted another quarter of slowing revenue growth
Thursday and said it would slash 9% of its global workforce, in its
first report since recent takeover interest from potential suitors
including Salesforce.com Inc. dissipated.
The social-media company's revenue rose 8.2% to $615.9 million,
its smallest gain and ninth straight period of declining growth.
Analysts expected revenue of $606 million.
Twitter recorded a loss of $102.9 million, or 15 cents per
share. Excluding certain expenses such as stock-based compensation
costs, Twitter posted a profit of 13 cents a share, compared with
the average analyst estimate of 9 cents per share.
Twitter's monthly active users totaled 317 million in the third
quarter, up just 1.7% from the second quarter. Cowen & Co.
analysts had projected Twitter's user base would rise to 315
million.
The company said its restructuring and workforce cuts focus
primarily on reorganizing its sales, partnerships and marketing
efforts as it seeks to become profitable in 2017. Twitter said it
expects to incur cash costs of $10 million to $20 million, as well
as stock-based compensation expense of $5 million to $10 million
associated with the restructuring, with most of the related charges
coming in the fourth quarter.
Shares, which have fallen 45% in the past 12 months, rose 4.3%
to $18.07 in premarket trading.
Twitter's results follow weeks of frenzied reports that the
company was fielding acquisition offers from Salesforce.com, Walt
Disney Co. and Google parent Alphabet Inc.—only to have them all
walk away earlier this month. Analysts don't expect another round
of takeover interest soon.
The lack of interest, at least for now, puts added pressure on
Chief Executive and co-founder Jack Dorsey, who has struggled to
accelerate revenue growth since retaking the CEO position a year
ago. Mr. Dorsey must reassure investors that the struggling company
is making headway on its strategy to reignite user growth, stem
slowing advertising revenue and rein in costs.
Skepticism among some analysts has deepened. Before Thursday's
results, Morgan Stanley analyst Brian Nowak wrote that marketers
are planning to decrease ad spend on Twitter compared with a year
earlier in favor of other services with "greater reach, lower
effective pricing and superior targeting."
Indeed, as Twitter's woes continue, bigger rivals like Facebook
have pulled further ahead while smaller upstarts like Snapchat,
Instagram and Pinterest are quickly gaining ground. There could be
"another wave of defections" at Twitter because of its lack of
traction on recent product initiatives, SunTrust Banks Inc. analyst
Bob Peck wrote in a recent research note.
Besides incremental product tweaks, Mr. Dorsey is banking on the
social media company's push to live-stream premium content such as
National Football League games and the recent presidential debates.
Twitter struck a $10 million deal with the NFL to live stream
Thursday night games.
Twitter attracted an average audience of more than 200,000
viewers for its first seven games through last week under the
partnership. But only two of the 10 Thursday night NFL games it
acquired the rights to stream took place in the third quarter.
An average of 243,000 viewers a minute tuned into the first
game, featuring the New York Jets against the Buffalo Bills on
Sept. 15. The second game between the Houston Texans and New
England drew a bigger average audience—roughly 327,000.
More than bringing in new ad-revenue opportunities, Twitter
executives hope its live-streaming content will help broaden its
user base to mainstream users—namely, those who haven't understood
the purpose of Twitter—and increase engagement on the platform as
people tweet about the games and shows being broadcast.
In a recent report, Wells Fargo analyst Peter Stabler noted that
an analysis of Nielsen Social TV ratings data showed that Twitter
enjoyed a substantial bump in the share of social engagement around
its inaugural NFL live-stream on Sept. 15. But that lift has
steadily fallen during subsequent games.
Morgan Stanley analysts project the NFL deal will generate just
$11 million in incremental ad revenue in the fourth quarter.
Excluding that benefit, Twitter's owned-and-operated ad revenue
will grow just 1%, according to Morgan Stanley.
Write to Deepa Seetharaman at Deepa.Seetharaman@wsj.com
(END) Dow Jones Newswires
October 27, 2016 07:55 ET (11:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Walt Disney (NYSE:DIS)
Historical Stock Chart
From Aug 2024 to Sep 2024
Walt Disney (NYSE:DIS)
Historical Stock Chart
From Sep 2023 to Sep 2024