SAN FRANCISCO — Twitter said Tuesday it would jettison up to 336 people — roughly 8% of its workforce — as part of a restructuring CEO Jack Dorsey says will place the social network “on a stronger path to grow.”
Dorsey confirmed the layoffs in a memo sent to employees and shared through his Twitter account.
Dorsey says the company is working “around the clock” on a streamlined roadmap for Twitter, its video app Vine and live broadcast service Periscope. But Dorsey also warned this roadmap will feature a smaller Twitter team.
“Product and Engineering are going to make the most significant structural changes to reflect our plan ahead,” said Dorsey in his memo. “We feel strongly that Engineering will move much faster with a smaller and nimbler team, while remaining the biggest percentage of our workforce. And the rest of the organization will be streamlined in parallel.”
Shares of Twitter surged 3.2% in pre-market trading following the announcement.
In one of his first official acts as Twitter’s new CEO, Jack Dorsey is undertaking a series of cost-cutting measures, including the layoffs and calling off the expansion of the company’s San Francisco headquarters.
“It’s a tough way for Jack Dorsey to introduce himself to the company, but Twitter needs to tighten its belt until it can figure out its user growth problem,” said Jan Dawson, chief analyst with Jackdaw Research.
Dorsey, the company co-founder who has served as interim CEO since July, was appointed to the position last week after a three-month search.
He is retaking the helm as Twitter as struggles to attract new users and restore confidence on Wall Street. The main challenge: Twitter faces growing competition for advertising dollars and people’s attention from Snapchat, Facebook and the Facebook-owned services Instagram and WhatsApp.
About 300 million people sign in to use the service at least once a month, making Twitter about one-fifth the size of rival Facebook, which has nearly 1.5 billion users, and smaller even than Instagram, which recently surpassed 400 million users.
Twitter Chief Financial Officer Anthony Noto said during the second-quarter conference call with analysts that reigniting user growth would take “considerable” time.
Dorsey has pledged to tackle the challenge head on by making the product “easier and more compelling to more people.”
Twitter has had better luck wringing money from the social media service. The company increased revenues from $28.3 million in 2010 to more than $1.4 billion in 2014 and is expected to surpass $2 billion this year. But revenue growth rates are slowing. In July, Twitter reported its smallest quarterly revenue growth as a publicly traded company. And Twitter is still not profitable.
“Monetization has been going really well, but it’s still not close to being consistently profitable and it’s been hiring pretty aggressively, so some cuts should help get things in better balance,” Dawson said.
Dorsey says the company will lay off up to 336 employees, representing about 8% of its workforce. As of June, Twitter had 4,200 employees.
The layoffs are unlikely to endear Dorsey to the staff, “even the ones that stay,” Dawson said. “It’ll be important to make clear that this is a once-and-done move and not something that’s going to become a regular occurrence at Twitter.”
Twitter was planning a 100,000-square-foot expansion into a building across from its San Francisco headquarters that houses Square and Uber. That’s now been tabled.
Twitter stock soared last week as Dorsey was named CEO, but fell in after-hours trading on Friday after technology news outlet Re/code broke the news of the impending layoffs.
Follow USA TODAY senior technology reporter Jessica Guynn on Twitter: @jguynn.
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