No partner in sight, Twitter faces tough solo choices
The apparent lack of interest in Twitter Inc by potential suitors may force the social media company to consider a route anathema to aspiring tech startups: a major restructuring and cutting some its nearly 4,000 employees.
The popular but money-losing micro-blogging service spent aggressively on product development and marketing in recent years, betting that it could afford to post 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.
Earlier this month, Twitter hired bankers to explore selling itself. Technology and media companies including Salesforce.com Inc, Walt Disney Co and Alphabet Inc’s Google looked at the company but ultimately passed on buying it. The aborted sales process - and the company’s strategy as an independent company - will be back in the spotlight when Twitter reports earnings on Oct. 27. The company declined to comment. “It’s going to take some bold moves here,” said David Hsu, a management professor at the University of Pennsylvania’s Wharton School, suggesting job cuts may be an option. “It takes a very lean staff to maintain the core Twitter as an advertising and messaging platform,” Hsu said.
According to SunTrust analyst Robert Peck, Twitter could cut 10 percent of its workforce and save about $100 million a year. Major layoffs, though, could hurt the company’s image in San Francisco, where the competition for engineering talent is fierce. The company may look first at cutting sales and marketing, an area in which it is spends more than twice as much as its rivals to earn each dollar of revenue. “Twitter’s cost structure was originally built to grow into a much larger user base,” said Peck. “But with user growth stagnating, the company likely needs to reduce excess costs.”—Reuters