Elon Musk, the world‘s richest man, now has plans to run Twitter that appear to be very different from those he laid out when he initially agreed to buy the company in April. In the first days of the deal, Musk made an ambitious proposal to investors. According to the financing plan exposed by the media in May, Musk had planned to increase the number of Twitter employees from 7,500 to 11,072, an increase of 48%.
However, less than six months later, Musk now wants to slash Twitter’s workforce by nearly 75%, slashing the size to just 2,000.
Why have you changed your mind?
Ali Mogharabi, a Twitter analyst at investment research firm Morningstar, said he hasn’t seen a major change in Twitter’s business enough to justify a sharp adjustment to Musk’s headcount plan. of. However, the reason may be external factors.
“A lot has changed outside of the company since Musk first spoke to Twitter employees. The uncertainty in the macro environment has definitely increased.” Mogarabi was referring to the overall economic slowdown.
Twitter, which makes most of its revenue from advertising, could decline as a potential recession spooks advertisers, he said.
become a cash cow
Although Musk raised the possibility of layoffs in 2023 in his May funding proposal, there was no indication at the time that he might lay off more than 5,000 employees.
Mogarabi estimates that the slowdown in Twitter’s potential revenue and the investors who funded Musk’s acquisition of Twitter could “ask Musk to turn the business into a cash cow,” which could be a big change in his attitude s reason.
Mark Shmulik, a Twitter analyst at investment bank Bernstein, believes that layoffs of this magnitude could hurt the company’s bottom line rather than help it. “I’ve always thought that you can divide these companies into three different categories: fat, muscle and bone. Fat is something like those discretionary items, muscle might be the revenue generating thing but on a smaller scale, and bone It’s the key to survival. If you’re really going to lay off 75 percent of Twitter’s workforce, you’re shedding all that fat, and you’re also shedding some muscle.”
“I think if the deal goes through and he goes in that direction, we’ll definitely see how leaner these agencies can actually be.”