Twitter to lay off 8% of workforce to save costs

Twitter is laying off up to 336 employees, signaling CEO Jack Dorsey's resolve to slash costs while the company struggles to make money.

The cutbacks announced Tuesday could equate to about 8 percent of Twitter's workforce of 4,100 people.

The purge comes two weeks after Twitter brought back one of its co-founders as permanent CEO in hopes that Dorsey would be able to resolve problems that have slowed user growth at the messaging service and compounded an uninterrupted cycle of financial losses.

Cutting costs can boost profits but at Twitter, it has also raised uncertainty about the future, the company's desire for aggressive growth and the larger audience it has sought for so long.

Turnaround plan

The layoffs may be a sign of desperation at a sinking company, said Edison Investment Research analyst Richard Windsor.

"It is important to run a tight ship, but simply cutting jobs is often the action of a company that does not know what else to do," Windsor said.

Yet Twitter's workforce has nearly doubled over the past two years, weighing on efforts to turn a profit for the first time in its nine-year history. Since Dorsey and his partners started the service, Twitter has lost nearly $2 billion US; investors are now worried that the company's third-quarter results, scheduled for October 27, will be another disappointment.

Still, early trading in shares of Twitter Inc. suggested that investors agree with Dorsey, that the company must cut back before it begins to grow.

Stock reaction

Shares rose almost 3 per cent after the opening bell Tuesday.

Dorsey has acknowledged that Twitter is too confusing for many people to use, turning off new users at a time when other social services such as Snapchat and Facebook's WhatsApp have grown in popularity.

As part of its revival plan, Twitter last week unveiled a new feature called "Moments" that packages commentary, video and photos about major events that have captured people's attention. The work on Moments began while Dorsey's predecessor, Dick Costolo, was still Twitter's CEO.

After returning as CEO, Dorsey promised to make Twitter more accessible to the masses next year. Jettisoning jobs will give Twitter more financial leeway while it designs new tools.

Twitter's expenses through the first half of the year climbed 44 per cent to $1.2 billion. The company's revenue totaled $938 million during the same period.

The company said Tuesday that it would pay between $10 million and $20 million, almost all in severance costs. Total restructuring costs are estimated to be between $5 million and $15 million, charges which would be recognized by the end of this year.