Twitter Inc stock should move higher after the micro-blogging site announced layoffs, Jim Cramer said on Tuesday.
“I don’t like job cuts, don’t get me wrong…but I think Twitter was bloated,” Cramer told CNBC’s “Squawk on the Street.” “This is the first time Twitter recognizes that you can’t just be part of some sort of club where it doesn’t matter how you do.”
Twitter Inc said Tuesday that it was slashing up to 8 percent of its global workforce.
“Twitter is now showing that it was previously run haphazardly and now it’s being run laser-focused,” Cramer added. “I would not rule out this stock going higher from here.”
Twitter Layoffs Were Long Overdue
Twitter Inc will reduce its workforce by 336 jobs. The move comes shortly after co-founder Jack Dorsey was named full-time CEO.
In a letter to employees, Dorsey termed the layoffs as a means to refocus the firm’s efforts.
“We are doing this with the utmost respect for each and every person. Twitter will go to great lengths to take care of each individual by providing generous exit packages and help finding a new job.”
“This isn’t easy. But it is right. The world needs a strong Twitter, and this is another step to get there,” Dorsey wrote.
Over the last year, Twitter Inc ’s employee base had soared 24 percent; close to half of whom were engineers. During the same period, the firm recorded an average monthly user growth of measly 2.6 percent.
This led to growing internal debates that Twitter Inc needs to pare hiring as bloated employee levels was slowing growth. It took Dorsey to finally pull the trigger.
Dorsey Means Business
Jack Dorsey took over as permanent CEO eight days ago. Of those eight, there were only two business days in which the 38-year old didn’t roll out a new product or ad initiative.
Dorsey last week boosted investor morale by unveiling a promising news curation feature and an expanded video-ad service. Shareholder confidence was further lifted when Twitter in a securities filing, noted that third quarter revenue and a measure of its adjusted earnings is expected to come in above the high end of its previously projected range.
Twitter Inc ’s stock is up about 10 percent since Dorsey took over on Oct 5. But all that euphoria will evaporate quickly if Twitter doesn’t jump start user growth.
Jack Dorsey is well aware of fickle investor sentiment. He needs to rethink Twitter’s fundamental strategy to make it resonate with the average user.
The coming road map, he says, “will entail a plan to change how we work, and what we need to do that work.”