Even the cool young companies hit bumps sometimes. Twitter today confirmed that it would lay off 336 of its workers -- 8% of its workforce – with cuts primarily hitting product and engineering teams, but also going across the entire company.
CEO Jack Dorsey confirmed last week's rumors in a tweet this morning: "Made some tough but necessary decisions that enable Twitter to move with greater focus and reinvest in our growth." He linked to an SEC filing with details about the reorganization plan, a memo sent to employees today about the plan, and a forecast for the next quarter's financial report.
[Layoffs can lead to longterm trust issues. Read about it in Layoffs Breed Long Term Employee Distrust, Study Finds.]
Twitter began notifying affected employees of the cuts today, Dorsey said in his memo to all. But some users found out first when their access to work email and other accounts stopped working, according to tweets and other social media posts today.
Separately today, video multimedia messaging service Snapchat confirmed here that it had pulled the plug on its original-content effort -- called Snapchat Channel -- which had 15 employees. Snapchat is considered by some to be a potential rival to Twitter among the 13- to 34-year-old demographic.
In his memo to all workers at the company, Twitter CEO Dorsey explained the changes, saying that after working around the clock to produce a streamlined roadmap for Twitter, Vine, and Periscope, and launching curated feeds called "Moments" last week, it was time to make some workforce cuts.
"Product and Engineering are going to make the most significant structural changes to reflect our plan ahead," Dorsey wrote in a memo to employees. "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."
Dorsey, a Twitter co-founder who previously served in the top job at the company, returned as interim CEO in June when Dick Costolo stepped down. Last week, the board made Dorsey's appointment permanent. His first two moves were the Moments launch and the layoffs.
While Twitter's layoffs can't come close to matching the huge workforce cuts at companies such as HP, Twitter's a relatively young company that's been in growth mode. Layoffs could signal a new stage in its life and a changing strategy for the future.
Twitter has been under new pressure since its IPO two years ago, as investors and analysts have scrutinized its user numbers and expressed disappointment that they haven't grown faster. The company reported 316 million monthly active users in the quarter ended June 30, up from 276 monthly active users in the quarter ended June 30, 2014.
Profitability has also been a concern. While Twitter revenues have has grown significantly, expenses have also grown, and the company has struggled to become profitable according to normal accounting rules (GAAP). According to GAAP rules, the company has yet to turn a profit.
In a preview of the company's upcoming earnings report, Twitter forecast revenue for Q3 2015 to be at or above the high end of previously provided ranges of $545 million to $560 million. Earnings for the quarter are slated for release on Oct. 27.
Restructuring expenses, mostly severance costs, will total $5 million to $15 million, most of which will be recognized in the quarter ending Dec. 31.
Back in June, soon after Costolo's departure from the CEO job, rumors surfaced about Twitter potentially being on the sales block. It's not uncommon for companies to cut costs and clean house in anticipation of putting themselves up for sale, but there's no official indication that Twitter is going down that road. Still, the company's intentions may become clearer during the analyst call that follows Twitter's Oct. 27 earnings announcement.Jessica Davis has spent a career covering the intersection of business and technology at titles including IDG's Infoworld, Ziff Davis Enterprise's eWeek and Channel Insider, and Penton Technology's MSPmentor. She's passionate about the practical use of business intelligence, ... View Full Bio