Having failed to find an acquirer, Twitter has sketched out a restructuring plan aimed at becoming profitable by next year.
The social media company will start by eliminating about 9 per cent of its workforce, it said. Twitter's third-quarter results also showed initial signs of progress, as revenue and user growth beat analysts' expectations, helping CEO Jack Dorsey make a case for staying independent while seeking to restore growth.
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The results are a much-needed positive sign compared with the declining trajectory Twitter's been on over the past several quarters and the shares rose, though the report still may not be enough to shake investor scepticism about the company's future. Twitter explored selling itself at the end of last quarter, but all three potential suitors - Salesforce.com, Walt Disney Co and Google - ultimately decided not to bid, people familiar with the matter have said. Now Dorsey, who is also CEO at Square Inc, is laying out plans for an independent turnaround.
"We're going from nearly 60 per cent revenue growth last year to 8 per cent in the third quarter and uncertainty looking into the fourth quarter," said James Cakmak, an analyst at Monness, Crespi, Hardt & Co. "One must ask if a part-time CEO is allowing Twitter to operate at its maximum potential."
Revenue increased to $US616 million in the three months ending September 30, beating analysts' forecasts for $US605 million. The company reported 317 million monthly active users, ahead of analysts' average estimate of 315 million, and the net loss narrowed to $US102.8 million.
Dorsey began the company's earnings call with investors by declining to comment on any of the reports of a sale process. When the board first made its move to hire bankers and explore options, Dorsey wanted to keep Twitter independent to have more time to prove out his strategy, people familiar with his thinking said at the time. Now, he'll get that chance.
Among Dorsey's priorities is making Twitter, which lets users post 140-character messages and follow others' posts, easier for people to use. He's also focused on the company's issues with harassment on its platform, drawing a larger audience through live video partnerships and capitalising on those to sell more video ads.
Video bet
Twitter has struggled to attract attention from advertisers, as marketers are hesitant to spend more on a platform that's not growing as quickly as competitors like Snapchat and Instagram. To address that, Twitter has begun streaming live video, including acquiring the rights to 10 NFL games on Thursday nights. That deal sparked others in sports, entertainment and politics. Bloomberg LP, the parent company of Bloomberg News, has an agreement to stream some televised events, such as the presidential debates.
The videos are meant to give potential Twitter users a new reason to use the service, without requiring them to make an account and follow people. They also help Twitter sell more premium video advertising. The initiatives are likely to boost user numbers and sales, executives said today.
Twitter was 1.7 per cent higher in early afternoon trade at $US17.59. The stock lost 25 per cent of its value so far this year through Wednesday, compared with a 12 per cent increase in the Russell 1000 Technology Index.
The reduction in staff compares with the 8 per cent cuts Dorsey implemented after he became CEO last year. The eliminations are heavily weighted toward the sales and marketing staff. Twitter is looking to be more efficient about spending as growth slows, especially as employee compensation becomes more of a burden amid a falling stock price. Analysts don't expect the company to be profitable on a quarterly basis until sometime in 2018.
And with only single-digit revenue growth, investors are still skeptical that Twitter will be able to go it alone for long, said Robert Peck, an analyst at Suntrust Robinson Humphrey.
"If these trends continue, we think that M&A; is inevitable," he said.