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Will axing employees make Twitter ‘faster’ and ‘nimbler’? CEO Jack Dorsey thinks so

Jack Dorsey

Twitter Chief Executive Officer Jack Dorsey.

(Mary Altaffer / Associated Press)

Twitter Chief Executive Jack Dorsey may have spoken too soon in June when he described the company’s direction as “extremely strong and beautiful.”

The San Francisco microblogging site — a laggard in a world of fast-action social media companies such as Facebook and Snapchat — will slice 336 jobs, or 8% of its global workforce. Twitter began notifying affected employees Tuesday. Its shares nudged up 1.08% on Tuesday, to $29.06, on a down day for the market.

The axing is Dorsey’s first major move since being crowned Twitter’s permanent chief executive Oct. 5 after three months as interim chief.

“The restructuring is part of an overall plan to organize around the company’s top product priorities and drive efficiencies throughout the company,” Twitter explained in a securities filing. “The company intends to reinvest savings in its most important priorities to drive growth.”

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Although Dorsey used plainer English in a letter to employees titled “A More Focused Twitter,” he wasn’t any clearer on what the focus will be.

The employees most affected are Twitter’s product and engineering teams, the letter said.

“The engineers will move much faster with a smaller and nimbler team, while remaining the biggest percentage of our workforce,” Dorsey wrote. “And the rest of the organization will be streamlined in parallel.”

Above all, Dorsey said, “the world needs a strong Twitter, and this is another step to get there.”

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Since being named interim CEO, Dorsey has been quick to shake things up at the struggling social network.

Lauded as a visionary big thinker, he has attempted to accelerate the pace of innovation while trying to strengthen its core business — a platform for people who want to electronically communicate in pictures and messages of 140 characters or fewer.

Twitter hasn’t caught fire like competing services from Facebook and Snapchat have. Critics have long complained that Twitter is too hard to use.

Dorsey, who co-founded the company in 2006 and has served as CEO once already, said he aims to make Twitter easier to understand and more relevant to anyone in the world.

Under Dorsey, Twitter removed the 140-character limit for direct messages from one user to another, and the company reportedly is considering expanding the 140-character limits on tweets.

Dorsey is working more closely with advertisers, connecting them with users tweeting on specific events, including music festivals, elections and football games.

A new TV Timeline feature tracks conversations around favorite TV shows. Twitter has also boosted partnerships with online shopping platforms to make it easier to buy stuff on Twitter.

The company recently introduced a feature called Moments, which consolidates tweets around hot topics in the news.

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In July, Twitter reported second-quarter revenue was up 61%.

Still, the company remains dogged by slow user growth and poor engagement — how frequently and deeply users interact with Twitter. Average monthly active users, a key growth metric, totaled 304 million core users in the quarter, up only 2 million from the first quarter.

Dorsey — who will divide his time between Twitter and another company he founded and heads, Square — has been publicly critical, slamming Twitter for what he has called its lack of focus, unintuitive service and unclear value during the company’s most recent earnings call.

He said recent product initiatives have yet to produce “meaningful impact” on growth and engagement, which “is unacceptable and we’re not happy about it.”

Some analysts cheered the layoffs announcement, saying the long-term cost savings would help Twitter catch up to other tech companies.

“The company stated it is going to reinvest the savings into driving growth, which could inhibit near-term margin improvement but should improve the workforce and expense structure,” said Blake Harper, Internet industry analyst at Topeka Capital Markets, in a note to investors Tuesday.

Others, such as Victor Anthony, an analyst at Axiom Capital Management, are more wait-and-see. He called Twitter a “work in progress.”

“Much work is ahead to drive up engagement and user growth,” he said in a report. “A more streamlined and more nimble organization could help with those efforts.”

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Rumors of possible layoffs emerged this month when news site Re/Code reported via unnamed sources that the company planned to slim down its workforce in an effort to reduce costs. A Twitter spokeswoman had declined at the time to comment on “rumor and speculation.”

Harper said a co-founder pulling the trigger on layoffs could be more digestible for remaining employees than if an outsider had been hired as CEO.

“While it is still to be determined what impact the move will have, we view it positively that Mr. Dorsey has acted decisively early in his tenure,” the analyst said.

That being said, Wedbush Securities analyst Michael Pachter warned that staff reductions won’t be enough.

“Head-count cuts are a good thing, but the stock isn’t a growth story unless users are growing,” he said.

Dorsey replaced former CEO Dick Costolo, who resigned amid the company’s struggles to attract new users and introduce products and features that keep existing users interested.

tracey.lien@latimes.com

Twitter: @traceylien

andrea.chang@latimes.com

Twitter: @byandreachang

Lien reported from San Francisco and Chang from Los Angeles.

Times staff writer Paresh Dave contributed to this report.


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