Would Jack Dorsey’s Exit Cure Twitter?



Calls for Dorsey to step down

Twitter (TWTR) is set to report its 1Q17 earnings at a time when some investors have called for the resignation of its CEO, Jack Dorsey. Dorsey also serves as the CEO of digital payments provider Square (SQ), a rival of PayPal (PYPL).

Those calling for Dorsey to step down believe that Twitter needs much greater management attention than Dorsey has been able to contribute, given his position as CEO of two public companies. 

There is a feeling among some investors that a leader who can dedicate time and energy to serving Twitter could help the company overcome many of its problems. Some of these problems existed during the tenure of Twitter’s former CEO, Dick Costolo, and have persisted under Dorsey.

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No progress in the domestic market

Twitter’s woes can be seen in anemic subscriber and revenue growth. The company’s worldwide subscribers increased by less than 5% year-over-year in 4Q16. Its US (SPY) subscriber base stayed flat at 67 million, as shown in the chart above. 

Twitter’s (TWTR) 4Q16 revenues rose just 1% from 4Q15 to $717 million. The company missed its internal guidance and Wall Street consensus.

Potential impact of ousting Dorsey from Twitter

There can be no guarantee that Dorsey’s exit would bring redemption to Twitter. Dorsey has repeatedly said he is focused on leading both Square and Twitter to success. Perhaps his ouster could further complicate Twitter’s recovery, considering that he recently discussed Square and Twitter having potential synergies between them that he would like to exploit.

Efforts to turn Twitter around have yielded few results, partly because of fierce competition from Facebook (FB) and Snapchat.


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