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 significant 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 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 is probably 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.”