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#SocialStocks: Zoom at the Heart of Latest Tech Layoffs

Posted February 9, 2023 at 3:00 pm
Andrew Perez
The Fly

FTC waves white flag in Meta lawsuit, Pinterest and Meta report Q4 earnings, and other notable stories from this week

Welcome to “#SocialStocks,” The Fly’s weekly recap of Wall Street’s reactions to social media stock news.

EMPLOYMENT CHANGES: 

In a process known as “flattening” internally at Meta Platforms (META), managers and directors are being asked to switch to “individual contributor” roles at the company, as the social media giant looks to become more efficient, wrote Sarah Frier and Kurt Wagner for Bloomberg, citing people familiar with the matter. “Individual contributors aren’t in charge of others, and instead focus on tasks like coding, designing and research,” added the Bloomberg story.

After more than eight years at Snap (SNAP), Ben Schwerin – the company’s top content and partnerships executive – is leaving next month, Variety’s Todd Spangler reported. Schwerin, who is Snap’s senior VP, content and partnerships, informed team members of his decision to leave the company at the end of March to “pursue a new opportunity.” Schwerin’s departure comes as the company’s overall revenue growth has slowed dramatically in recent quarters amid a fall-off in ad spending, the author writes.

TECH LAYOFFS LATEST:  

Zoom Video Communications (ZM) CEO Eric Yuan announced via a blog post: “We have made the tough but necessary decision to reduce our team by approximately 15% and say goodbye to around 1,300 hardworking, talented colleagues…Within 24 months, Zoom grew 3x in size to manage this demand while enabling continued innovation. We worked tirelessly and made Zoom better for our customers and users. But we also made mistakes. We didn’t take as much time as we should have to thoroughly analyze our teams or assess if we were growing sustainably, toward the highest priorities. As the world transitions to life post-pandemic, we are seeing that people and businesses continue to rely on Zoom. But the uncertainty of the global economy, and its effect on our customers, means we need to take a hard – yet important – look inward to reset ourselves so we can weather the economic environment, deliver for our customers and achieve Zoom’s long-term vision. Each organization across Zoom will be impacted by these changes ..As the CEO and founder of Zoom, I am accountable for these mistakes and the actions we take today- and I want to show accountability not just in words but in my own actions. To that end, I am reducing my salary for the coming fiscal year by 98% and foregoing my FY23 corporate bonus. Members of my executive leadership team will reduce their base salaries by 20% for the coming fiscal year while also forfeiting their FY23 corporate bonuses…We are humbled to be realizing Zoom’s platform vision, but we still have a lot of hard work ahead of us to ensure we’re delivering an experience that enables a new kind of productivity – one that brings all the best tools and applications for modern, engaging collaboration into one destination. While we have to take these steps today, we will continue to invest in key strategic areas to help us reach our vision.”

NEW DEMOGRAPHIC: 

Meta plans to revamp Horizon Worlds, including opening the app to users aged 13-17, seeking to improve user retention as competition intensifies, The Wall Street Journal’s Salvador Rodriguez reported. A teen launch for Horizon could happen as soon as March, according to people familiar with the matter. “Today our competitors are doing a much better job meeting the unique needs of these cohorts,” Meta VP of Horizon Gabriel Aul said in a memo, which was reviewed by The Wall Street Journal. “For Horizon to succeed we need to ensure that we serve this cohort first and foremost.”

ANTITRUST: 

The Federal Trade Commission will not appeal its loss in a prior suit which looked to block Meta Platforms’ from buying virtual reality start-up VR fitness company Within, reported Gizmodo’s. Mack DeGeurin. “The regulator’s decision marks a major win for Meta and draws renewed scrutiny on the agency’s capacity to successfully bring similar antitrust cases aimed at limiting Big Tech’s market dominance,” added the Gizmodo story.

The U.S. Federal Trade Commission rejected Meta’s request to prohibit chair Lina Khan from an antitrust from an antitrust case challenging the company’s proposed takeover of a virtual-reality startup, Bloomberg’s Leah Nylen and Emily Birnbaum reported. The agency voted 2-1 in the chair’s favor, with the one Republican on the commission dissenting, the authors say, citing a court filing.

EARNINGS EXIT: 

Pinterest (PINS) shares fell 10% to $25.18 after reporting its fourth quarter results and announcing the departure of its CFO Todd Morgenfeld. the company also provided Q1 revenue guidance and noted a new $500M share repurchase program as part of the earnings release. “Our current expectation is that Q1 2023 revenue will grow low single digits on a year-over-year percentage basis, which takes into account slightly lower foreign exchange headwinds than Q4 2022. We expect our Q1 2023 non-GAAP operating expenses to decline to low double digits percent quarter-over-quarter.” Evercore ISI analyst Mark Mahaney closed the firm’s “Tactical Underperform” call on Pinterest and maintains an In Line rating with an unchanged price target in the wake of what the firm calls “an In-Lineish & Lower quarter.” The firm’s tactical call was largely based on a belief that Street Q1 revenue estimates were “overly aggressive” given that they implied year-over-year growth acceleration and Evercore doesn’t see Pinterest “escaping the Ad Winter pressure that practically every other Internet Ad company is going through” in the near-term.

TEXAS TALKS TIKTOK BAN: 

Texas Governor Greg Abbott announced a statewide model security plan for Texas state agencies to address vulnerabilities presented by the use of TikTok and other software on personal and state-issued devices. Following the Governor’s directive, the Texas Department of Public Safety and the Texas Department of Information Resources developed this model plan to guide state agencies on managing personal and state-issued devices used to conduct state business. Each state agency will have until February 15, 2023 to implement its own policy to enforce this statewide plan. “The security risks associated with the use of TikTok on devices used to conduct the important business of our state must not be underestimated or ignored,” said Governor Abbott. “Owned by a Chinese company that employs Chinese Communist Party members, TikTok harvests significant amounts of data from a user’s device, including details about a user’s internet activity. Other prohibited technologies listed in the statewide model plan also produce a similar threat to the security of Texans. It is critical that state agencies and employees are protected from the vulnerabilities presented by the use of this app and other prohibited technologies as they work on behalf of their fellow Texans. I thank the Texas Department of Public Safety and Texas Department of Information Resources for their hard work helping safeguard the state’s sensitive information and critical infrastructure from potential threats posed by hostile foreign actors.”

META SURGES FOLLOWING Q4 REPORT: 

In Q4, Meta came up short of analyst expectations on EPS, but beat consensus on revenue. Mark Zuckerberg, Meta founder and CEO, said, “Our community continues to grow and I’m pleased with the strong engagement across our apps. Facebook just reached the milestone of 2 billion daily actives. The progress we’re making on our AI discovery engine and Reels are major drivers of this. Beyond this, our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.” The company did report positive daily active user trends and offered an upbeat Q1 outlook. Meta Platforms said: “We expect first quarter 2023 total revenue to be in the range of $26-28.5 billion. Our guidance assumes foreign currency will be an approximately 2% headwind to year-over-year total revenue growth in the first quarter, based on current exchange rates. We anticipate our full-year 2023 total expenses will be in the range of $89-95 billion, lowered from our prior outlook of $94-100 billion due to slower anticipated growth in payroll expenses and cost of revenue. We now expect to record an estimated $1 billion in restructuring charges in 2023 related to consolidating our office facilities footprint. This is down from our prior estimate of $2 billion as we recorded a portion of the charges in the fourth quarter of 2022. We may incur additional restructuring charges as we progress further in our efficiency efforts. We expect capital expenditures to be in the range of $30-33 billion, lowered from our prior estimate of $34-37 billion. The reduced outlook reflects our updated plans for lower data center construction spend in 2023 as we shift to a new data center architecture that is more cost efficient and can support both AI and non-AI workloads. Substantially all of our capital expenditures continue to support the Family of Apps. Absent any changes to U.S. tax law, we expect our full-year 2023 tax rate percentage to be in the low twenties. In addition, as previously noted, we continue to monitor developments regarding the viability of transatlantic data transfers and their potential impact on our European operations.” The Facebook parent company upped its share repurchase program by $40B and axed its Fy23 expense projections. On its conference call following results, the company commented that there will be more the company can do to increase efficiency and remarked FY23 will be “a year of efficiency.”. Shares were up 13% last week in the earnings aftermath.

Originally Posted February 8, 2023 – #SocialStocks: Zoom at the heart of latest tech layoffs

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