In a news which shocked twitter (and Wall Street) there was (finally?) a shake-up at Twitter Inc announced this afternoon. Below are some key excerpts from the company’s conference call.
Dick Costolo – Twitter, Inc. – CEO
Hi, everyone, and thanks for joining us today, particularly on such short notice. As Krista noted, I’m joined here by Jack Dorsey, in addition to our CFO, Anthony Noto. By now, hopefully, also through the power of our platform, you’ve seen that I have decided it is time to initiate a leadership transition here by stepping down as CEO of Twitter. After nearly six years with Twitter and the last five as CEO, I believe now is the right time for Twitter to focus on finding a new Chief Executive for the years ahead, and I’ll talk about why.
We’re making this public announcement prior to naming a permanent CEO. And in fact, it’s the very start of the official search because we want to be open about our search for Twitter’s next long-term leader. We also want to attract the best possible candidates and not distract the organization with the inevitable speculation and rumors that would obviously occur if we were to attempt to conduct a CEO search privately.
I initiated conversations with the Board and with some members of the Board at the end of last year about CEO succession as I contemplated what was next for me. And ultimately, following discussions with the full Board at our February meeting and then at our meeting last week, and my decision to step down, we agreed now is the right time to begin this transition.
So there’s never, ever a perfect time for a transition like this, but given the Company’s current extremely strong team, the pace and quality of execution that I’ve talked to you all about over the course of this year and the resources available to us, we as a Board are confident that we can execute a smooth transition here.
First off, we are in the extremely unique position of having the ideal leader to facilitate the transition while the Board conducts its search. Jack is not only our Chairman, which has involved him in every important strategic decision we’ve made, he’s also the inventor of the product and a co-founder with a deep connection to Twitter, its products, my team, and all of our employees.
Jack’s going to take on the CEO position on an interim basis as of July 1. I want to once again point out that Jack thinks elegantly and deeply about the product and engaging user experiences, and I’m delighted he’s stepping into the role.
He will be supported by the strongest management team Twitter has ever had, which was another factor in my decision to time this transition when I did. And in addition to that world-class team, we have a great foundation in place with a very clear strategy, which we’ve talked to you about, and objectives and priorities that map to that strategy.
You want to do these things when the org is stable, when it’s robust, when there’s a plan, a clear plan and a clear path forward against that plan, and that’s where we are today.
So before handing it over to Jack and then opening it up to Q&A, I really just want to thank the tremendously talented group of people here I’ve gotten to work with. It’s been a total delight to work alongside everybody and to have been part of such a great team. And I want to thank the Board, obviously, and my leadership team for the confidence they’ve placed in me. It’s just been a huge honor, and I look forward to supporting Twitter in any way I can, going forward.
And with that, it’s over to you, Jack.
Jack Dorsey – Twitter, Inc. – co-founder, Chairman
Thanks, Dick, and good afternoon. I’ll start off by saying a huge thank-you to Dick for his dedication and vision over the years. Twitter is very well positioned going forward, and that is entirely a reflection on Dick’s effective leadership, his successful building out of a multibillion-dollar public company, and the world-class team he has assembled.
As he said, I will be assuming the role of interim CEO while the Board conducts its search. My main priority in this role is to facilitate a smooth transition as Peter Curry and the rest of the search committee work to identify a permanent CEO, but to also ensure the continuation of all the good work Dick and his team have underway.
I’m excited to work even more closely with the Twitter team on the exciting lineup of products and initiatives coming to market. Twitter’s strategy is something I’m very close to and believe in, and it’s my goal during this interim period to encourage and build on that momentum. We have rolled out some exciting products, like Periscope and Fabric, and have more in the works coming later this year. Despite all we have accomplished, the Company still has huge unmet potential, and I am thrilled to be a part of capturing our opportunities ahead.
One thing I do want to make clear is that this transition is not the result of anything more than Dick deciding to move on from his role as CEO. We have a strong business with solid fundamentals, and our strategy, objectives, and priorities have never been more aligned. There’s no connection with our near-term results, as you can see from our reaffirming of our Q2 outlook.
The search committee expects to retain a search firm shortly and to begin a thorough process to identify a new CEO. That process has only just begun, and there is no timetable. The committee will take the time it needs to evaluate candidates, both inside the Company and outside. Importantly, the Board is fully committed to running a rigorous process to identify the right CEO to lead Twitter into its next phase of growth. In the meantime, it’s an honor for me to be stepping back into a management role as Twitter continues to grow and execute on its strategic priorities.
Three firms are already out with reports on the Twitter news.
Analysts at Stifel Nicholas note:
Twitter also reaffirmed its 2Q15 guidance but reiterated that the company is still not experiencing the benefits from seasonality and user growth initiatives that it previously noted in 1Q15. Importantly, when asked about changes to the product or strategy, management reiterated several times that it sees no change.
Analysts at Barclays opine:
The move was well received by investors with the stock jumping almost 8% on the announcement in the after-hours market before settling up 2% following the conference call. The CEO position at Twitter has been one under intense scrutiny since the company has been public, with Mr. Costolo’s tenure having been called into question several times over the past year. The timing of this announcement is somewhat surprising given the proximity to the end of the quarter. Also, the immediacy of Mr. Costolo’s departure raises our eyebrows as he will relinquish the role to co-founder Jack Dorsey rather than remain on himself, despite the fact that the search process has not yet begun. On the conference call, Mr. Dorsey affirmed his belief that Twitter is well positioned and that he plans to execute on the current strategy going forward.
Financially, our view has not changed. By reiterating guidance with only 18 days left in the quarter, management clearly appears confident in their ability to meet or exceed the targets laid out in the 1Q earnings release. However, their reluctance to offer any guidance on the MAU figure at this point in the quarter gives us some pause. All things considered, we remain Equal Weight with a $44 target price.
Analysts at Pivotal Research state:
While the change appears to be one of Costolo’s making, prior to this event, there were issues that caused generally unwarranted dissatisfaction among the investment community and among some press towards Twitter. Driving that dissatisfaction, what investors generally failed to understand about the company – and perhaps what management failed to fully communicate since the time of its IPO – was that Twitter was and remains a venture stage enterprise. It just happens to be traded publicly.
