Shulou(Shulou.com)11/24 Report--

October 21, according to foreign media reports, Tesla CEO Elon Musk (Elon Musk) said when planning to buy social media company Twitter, he plans to lay off nearly 75% of Twitter employees, reducing the company's number to just over 2000.

People familiar with the matter and internal documents also show that no matter who the future owner of Twitter is, the company is likely to make large-scale layoffs in the coming months. the change could have a significant impact on the Twitter platform's ability to control harmful content and guard against data security issues.

When buying Twitter, Mr Musk told potential investors that he planned to fire nearly 75 per cent of Twitter employees, reducing the company's staff from 7500 to just over 2000.

Even if Musk's deal to buy Twitter fails, the company will make large-scale layoffs. Internal Twitter documents and people familiar with the company's decisions suggest that the management now in charge of Twitter plans to cut employees' salaries by about $800m by the end of next year, a figure that would mean nearly 1/4 of employees leave. In addition, Twitter plans to slash infrastructure spending, including shutting down some data centers that serve more than 200 million users.

The massive layoffs also help explain why Twitter management is eager to sell the company to Musk. For troubled companies, the $44 billion acquisition is a timely help and allows management to avoid announcing layoffs. The current layoffs are bound to hurt the morale of the company's employees and may further affect the ability of the Twitter platform to combat misinformation, bad comments and spam.

Edwin Chen, a data scientist who used to be in charge of spam and health indicators on the Twitter platform, is now the CEO of content censorship startup Surge AI. He said millions of users could immediately feel the massive layoffs on Twitter. Edwin Chen said that while he himself believes that Twitter has the problem of overstaffing, Musk's proposed layoffs are "unthinkable", which will expose Twitter users to hacker attacks and expose them to all kinds of undesirable content.

"it will have a knock-on effect," Edwin Chen said. "you will see a decline in the level of service, and the people who stay will not have the ability to restore service, and they will completely lose confidence and want to leave."

Musk is expected to complete the Twitter deal by next Friday. People familiar with the matter said that after months of legal disputes, the two sides are clearly sincere in moving forward with the plan. If the deal closes, Musk will immediately become the new owner of Twitter.

"it's easy for Musk to buy Twitter and it's hard to fix the platform," said Dan Ives, a financial analyst at Wedbush Securities, the investment bank. "the challenge will be daunting to turn this around."

Nell Minow, a corporate governance expert and vice-president of ValueEdge Advisors, a consultancy, says Mr Musk may be peddling a corporate transformation plan to potential investors, but implementing his proposal will face challenges.

"Musk has to prove that if there are layoffs like this, what happens next?" Mino said. "what is he going to use to replace employees, artificial intelligence?"

Twitter executives have repeatedly told employees at the company's staff meeting that the company has no immediate plans to lay off staff. At a Twitter conference attended by Musk in June, Musk was asked about layoffs. Musk replied that he saw no reason for underperformers to stay at the company.

For his part, once the acquisition is completed, Musk faces the problem of how to make Twitter, which has been struggling for a long time, profitable. Information about layoffs also highlights Mr Musk's extreme plans to complete the transformation of the company.

Twitter has never achieved the profit margins and scale of other social media platforms such as Meta and Snap. Mr Musk plans to take the company private so that it does not have to please the market, which is a key reason why Jack Dorsey, the company's former chief executive and co-founder, supports Mr Musk's acquisition.

Twitter has been hit hard by months of repeated acquisitions, roller coaster ups and downs, and court actions by both sides. The company has serious problems such as staff turnover, slow recruitment, stagnant projects and stock price fluctuations.

Recently, Andrea Walne, a general partner at venture capital firm Manhattan Venture Partners, thought Twitter was currently worth only $10 billion to $12 billion and that other partners were trying to quit. Musk himself said in a conference call with Tesla on Wednesday that the price he and his investment partners offered to buy Twitter was "clearly too high".

Mr Musk told investors that he planned to double Twitter's revenue within three years and triple the number of daily active users watching ads over the same period, but did not elaborate on how those goals would be achieved.

Twitter currently estimates that the number of profitable daily active users is 237.8 million, an increase of 16.6 per cent over the same period last year. The company defines the number of profitable daily active users as the number of users who can see ads. However, at the time of legal proceedings between the parties, the figures listed in the documents submitted to the court are much lower. Musk claims that according to Twitter's own data, less than 16 million users can see the vast majority of ads.

In addition, according to relevant sources, the amount of time these users spend browsing Twitter fell by 10% in 2021 before recovering slightly in the first quarter of 2022.

Interviews with relevant people and company documents show that layoffs and rehiring of some employees are an important part of Musk's transformation of Twitter. Although Musk had previously said he was willing to lay off staff, he did not disclose specific figures. When communicating via text message with a friend, he agreed that Twitter revenue was not enough to justify the number of employees compared with other technology companies, according to legal documents.

In a report prepared for investors and interested parties, Mr Musk's optimistic business forecasts are based in part on massive layoffs in "bloated" companies. One potential investor, who spoke on condition of anonymity, described the proposal bluntly, and Mr Musk likened it to a leveraged buyout, profiting by slashing labour and operating costs.

But Mr Musk told colleagues that he believed that significantly streamlining the company was the first step in implementing a transformational strategy, including the introduction of more productive employees and innovative models that could be profitable. Musk wants to expand new services such as subscriptions, such as letting users pay to subscribe to exclusive content posted by celebrities, which he claims will generate more revenue.

But Twitter's own data show that the subscription business may not lead to a significant increase in revenue. This is because the users who browse the most ads on the platform are also the most likely to join the subscription service. If they start paying monthly and no more ads when browsing content, it could affect Twitter's most profitable advertising business by far.

Twitter's employee budget last year was about $1.5 billion, including many well-paid advertising salespeople and thousands of engineers. The company has also invested hundreds of millions of dollars to hire people to censor illegal content on the platform, such as hate speech. Twitter shelved some of its cost-cutting plans before announcing the sale to Musk in April.

Internal documents also show that Twitter is setting up a performance appraisal system called "stack ranking", which requires managers to rate employees according to the digital curve, so that a certain percentage of employees will always be marked as underperforming. The move has been strongly protested by employees, but Twitter says other technology companies have done the same.

Twitter's HR specialist has publicly told employees that the company does not plan to make large-scale layoffs. But the documents show that even before Musk proposed to buy Twitter, management had plans for massive layoffs and cuts in infrastructure operating costs. Musk will lay off staff on the basis of these plans. The first is to lay off employees who are deemed "abnormal" by the company's human resources system or have a score of less than 3 (out of 5), and then start laying off other employees.

A few weeks before the announcement, Mr Musk and his lawyer, Alex Spiro, marketed the deal to elite investors in Silicon Valley and Wall Street, claiming it was not only an opportunity to change Twitter, but also a rare opportunity to work with Mr Musk. It is worth noting that not all potential investors get the same information from Musk's team.

Mr Musk's biggest partners in the deal include Oracle co-founder Larry Ellison (Larry Ellison) and Sequoia Capital partner Doug Leon (Doug Leone). Hedge fund manager Kenneth Griffin (Kenneth Griffin) also pledged less than $20 million to buy Twitter, while Ellison pledged $1 billion.

Many potential well-known investors approve of Musk's plan.

But private equity firms Puxin Group, TPG and Warbug Pincus Group, which together control more than $1.4 trillion, all decided not to invest after contacting Musk's representatives, according to people familiar with the matter.

Some heavyweights in Silicon Valley have also expressed disagreement with Mr Musk's plan. Reid Hoffman, founder of LinkedIn, helped Musk contact Satya Satya Nadella, Microsoft chief executive, in the process of financing the Twitter acquisition, according to people familiar with the matter. But Hoffman himself decided not to invest.

Founders Fund, a Silicon Valley venture capital firm founded by billionaire Peter Thiel, also opposed the deal. Thiel first worked with Musk in 2000, when the two merged to form the payment company PayPal. Mr Thiel's colleagues say he is strongly in favour of letting Mr Musk run Twitter.

It is not clear whether these people do not agree with Musk's approach or do not want to get involved.

One potential investor who lost interest said he was concerned that the cost of the deal would affect Mr Musk's own financial position as well as Tesla after the market downturn continued.

After announcing his plans to buy Twitter, Musk mercilessly attacked Twitter and the company's management, further affecting Twitter's share price. Mr Musk's approach will only make everything look more messy.

"it's like buying a new car because you don't want it, and then crashing it," the person said. "and then you say,'I'm going to keep it.'"

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