TWTR Executives Head for the Hills

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When Jack Dorsey first stepped up as the new Twitter (TWTR) CEO, he was quick to chastise management’s failure to attract new users and seemed determined to turn things around for the struggling company. And yet, almost four months into his reign, the picture hasn’t gotten any better.

TwitterIn fact, the stock has fallen almost 50% since Dorsey’s return, now trading well below its IPO price. Then, the Street was blindsided this week with news that four senior executives will be leaving the company.

In a series of tweets, Dorsey assured that the executives had not been fired and were all leaving of their own accord—but I’m not quite convinced that that’s any better than the alternative.

TWTR Isn’t a Start-Up Anymore

As I’ve said for a while now, TWTR has always had a problem with execution. It isn’t a start-up anymore with a handful of genius kids in a rented basement creating something new and cool. It’s an $11 billion company that employs 3,600 people, with a healthy assortment of highly-paid executives steering the enterprise.

That means you manage for continuity with long-term results in mind. Losing so many upper-level employees all at once doesn’t feel like continuity; it feels like barely directed chaos, which is a bad sign for TWTR stock, or for any organization.

A situation like this seems especially ominous when you’re stuck in TWTR’s position, still trying to figure out a route to sustainable profit. Unfortunately, TWTR has now lost a significant chunk of its product team: media head Katie Jacobs Stanton and Kevin Weil, head of the engineering division. These are the people who sat in the driver’s seat on that route to profitability.

Now, Dorsey needs to refill those empty seats before the company can get moving again…as well as account for the wasted time and resources that have set the company back yet again.

Losing human resources head Brian Schipper was a major blow, too. TWTR is obviously bleeding talent, and it’s HR’s job to woo new talent to replace the missing bodies. But, HR is gone now.  

Management Hasn’t Been Getting the Job Done

In the meantime, you’ve got a company that simply isn’t getting results with the current management team. Maybe those executives jumped ship because they don’t agree with Dorsey’s changes or the way the corporate culture is evolving. We can’t know for sure. Either way, in mature organizations, employees stage an exit — they don’t all walk out at once.

The core issue at hand is that TWTR employees haven’t been able to generate enough profit. The company brings in $540,000 per employee, but burns close to $700,000. That’s a red flag of inefficient management.

Yahoo (YHOO) is in a similar position, but is even less efficient at gathering revenue on a per-employee basis. Only its holdings in Alibaba (BABA) keep it in the black.

On the other side, the team at Alphabet (GOOGL, GOOG) is the gold standard, as every single person at that company is worth $275,000 per year in pure profit (that’s after salaries, benefits and costs).

That’s where TWTR needs to be, but it’s a long road ahead. Whether Dorsey has what it takes to get his company to that point remains to be seen.

Hilary Kramer is the editor of GameChangersBreakout Stocks Under $10High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/01/twtr-stock-twitter-executives-head-for-the-hills/.

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