The media has reported that Snap Inc. (NYSE: SNAP), the social media company, will fire 20% of its staff. Verge wrote that this could be as many as 1,000 people. It is another setback for CEO Evan Spiegel, who should have been pushed out years ago. He has held the job since May 2012.
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In late July, Snap’s shares dropped over 20% as it reported a brutally poor quarter. According to CNBC, management said, at that time: “forward-looking visibility remains incredibly challenging.” Spiegel has been in his job long enough that this was an unacceptable excuse.
It is shocking that Snap does not do better financially. It has 347 million daily active users. Management claims that over 75% of people ages 13 to 34 use Snap across a total of 20 countries. Other than Facebook, it would be hard to find such impressive numbers for a social media company. Spiegel said second-quarter results “do not reflect our ambition.” However, he did not say what that ambition is.
Snap’s growth was slowed for what was once a “hot” media company. Revenue rose only 13% in the most recent quarter to $1.1 billion. Its loss grew a massive 178% to $422 million. It is hard to imagine how this was possible.
Snap still has about $5 billion in cash and securities. It would be better to return that money to shareholders than to waste it in future quarters.
The most damning number for Snap and Spiegel is that the stock has sold off almost 80% this year. Few stocks have savaged investors so completely. And the process does not appear to be over.
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