FILE PHOTO: People holding mobile phones are silhouetted against a backdrop projected with the Twitter logo in this illustration picture taken September 27, 2013. REUTERS/Kacper Pempel/Illustration/File Photo
BENGALURU: Twitter Inc said Thursday it would cut 9% of its global workforce to keep costs down even as quarterly results beat Wall Street expectations, lifting shares that had fallen in recent weeks after a failed effort to sell the company.
Third-quarter revenue growth slowed sharply but topped analysts’ expectations. Its stock was up 1.3% to US$17.52, after rallying 5% in premarket trading.
Revenue rose about 8% to US$616mil (RM2.59bil), above the average analyst estimate of US$605.8mil (RM2.55bil). The company reported a 20% rise in revenue in the previous quarter and 58% last year.
Total advertising revenue of US$545mil (RM2.29bil) grew 6% year-over-year, and 90% of it came from mobile.
Excluding items, the company earned 13 cents per share, beating the average estimate of 9 cents, according to Thomson Reuters I/B/E/S.
The company is “more disciplined about how we invest in the business” and intends to be profitable in 2017, said chief financial officer Anthony Noto.
Among its priorities, Twitter is dedicated to growing its burgeoning live video offerings through partnerships with organisations such as the National Football League, Noto said.
Advertisers are increasingly interested in live video because of its potential to reach new and younger audiences, he added.
Twitter, which has seen user growth stall amid competition from nimbler rivals such as Instagram and Snapchat, said its user base ticked up 3% to 317 million average monthly active users in the quarter.
Analysts, on average, had expected 316.3 million monthly active users, according to market research firm FactSet StreetAccount.
“The building blocks for revenue are increasing the number of users, and Twitter is not doing a particularly good job of that,” Wedbush Securities analyst Michael Pachter said. He added that Twitter needed to grow revenue by US$200mil to US$300mil a quarter to achieve 2017 profitability.
“The run-rate for the year is under US$100mil in profit, so it is really hard to justify spending US$15bil or US$18bil to buy a US$100mil profit (company),” Pachter said.
Twitter hired bankers last month to field acquisition offers, but it has seen a dearth of potential bidders after Salesforce.com Inc, the last of the companies believed to be interested, said it was not bid.
The apparent lack of interest forced the social media company to consider a route anathema to aspiring tech startups: a major restructuring.
More layoffs
Twitter had 3,860 employees globally as of June. The reduction of more than 300, chiefly in its sales, partnerships, and marketing efforts.
The cuts come about a year after a similar wave of layoffs of up to 336 employees were announced when Jack Dorsey, its co-founder who had been serving as interim chief executive, took over as permanent CEO.
Since then, Dorsey has drawn criticism from some analysts for splitting his time between Twitter and Square.
The company said it expected cash expenditures of about US$10mil to US$20mil in the fourth quarter, mostly for severance costs.
On an investor call Thursday, Dorsey said he would not comment on speculation about a potential sale. He said in a statement that the company has “a clear plan, and we’re making the necessary changes to ensure Twitter is positioned for long-term growth.”
Asked by investors whether major events such as presidential debates or the Olympics affected Twitter’s quarterly growth in metrics, Noto said there needed to be such an event “every day” on the platform to meaningfully improve numbers, and “that’s where we’re headed.”
The popular but money-losing microblogging service spent aggressively on product development and marketing in recent years, betting it could afford losses as long as it attracted new users. But that growth stalled this year after it exceeded 300 million active monthly users, less than a fifth of Facebook Inc’s users and below Facebook’s Instagram.
The company’s net loss narrowed to US$102.9mil (RM433.1mil), or 15 cents per share, in the third quarter ended Sept 30, from US$131.7mil (RM554.4mil), or 20 cents per share, a year earlier.
Twitter also said it would roll out “meaningful updates” next month affecting how it protects users from abusive content, an issue for which the company has endured growing criticism. - Reuters
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