Twitter wilts as interim CEO gives no hope

2015-06-14 14:59 - Sarah Frier
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From left Twitter co-founders Jack Dorsey, Christo

From left Twitter co-founders Jack Dorsey, Christopher Isaac 'Biz' Stone, Evan Williams and Twitter CEO Richard 'Dick' Costolo on the trading floor of the New York Stock Exchange in November 2013. (File, AFP)

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New York - When Twitter announced a change in leadership, the stock gained on optimism that co-founder and interim Chief Executive Officer Jack Dorsey would bring the vision and product expertise to improve the service.

However, Twitter shares have pared the gains of Friday after Dorsey said he’ll do no such thing. Dorsey, who was CEO once before, said he agrees with Twitter’s current direction and will mainly focus on helping the San Francisco-based company achieve its current goals and plans.

“I don’t anticipate any changes in strategy or direction,” Dorsey said in an interview on Thursday.

That could mean that any big, bold changes in strategy that could help to accelerate user growth or make the service more popular won’t come about until the search is over. The company also didn’t set a timetable. Twitter hasn’t been adding users as quickly as expected, and investors including Lowercase Capital’s Chris Sacca have opined on how the company can’t fix that by changing the service incrementally.

“It was just so strange to say that their strategy and everything is working” when Dorsey addressed investors on a conference call, said Ben Schachter, an analyst at Macquarie Securities. “I don’t think they have a lot of credibility right now. Wall Street is not impressed with the strategy and certainly not impressed with the execution.”

Delayed changes

Even though Twitter shares jumped as much as 13% in extended trading after it announced the departure of Dick Costolo as CEO, the stock gave up all of the gains. Twitter shares were little changed at $35.90 at the close in New York. The stock is down more than 30% since it reported disappointing earnings results in late April, with slower user growth and revenue forecasts below analysts’ projections.

“You saw the stock pop because people were excited about the prospect and possibility of change, and then it seems like the company, and its executives, have really tried to debunk that perception,” said Scott Kessler, an analyst at S&P Capital IQ.

While Twitter’s board said Costolo had been discussing leaving for months, they still haven’t retained a search firm to set the process in motion for his replacement, further delaying any needed change, Kessler said.

“The stock is going to continue to go sideways or even down, when the market becomes aware that revenues are going to stagnate without a massive change,” said Richard Windsor, an analyst at Edison Investment Research.

New, old

Dorsey was pushed out from the top position at Twitter in 2008 from the firm he helped create, after clashing with co-founder Evan Williams. Still, as chairperson, Dorsey helped oversee product development in 2011-2012 before leaving to focus on Square, his payments startup. Dorsey also recommended that Twitter acquire Vine, the short-video sharing application.

Dorsey, 38, demurred when asked during an interview whether he’s interested in becoming Twitter’s permanent CEO. “It’s really up to the search committee and they’re going to look at internal and external candidates,” he said.

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