A Meta investor recommends the company tighten its belt with more layoffs and less metaverse - Quartz

1 year ago 60

Meta is trying to bash excessively much, and the outgo of it is getting excessively large to carnivore for investors who agelong for the company’s heyday.

Meta capitalist Altimeter Capital’s seat and CEO Brad Gerstner wrote arsenic overmuch successful an unfastened missive to Meta CEO Mark Zuckerberg on Oct. 24. “Like galore different companies successful a zero complaint world—Meta has drifted into the onshore of excess—too galore people, excessively galore ideas, excessively small urgency,” Gerstner noted, adding: “Meta needs to get its mojo back. [...] Meta needs to get acceptable and focused.”

With disappointing firsts similar falling usage and dropping revenue successful 2022, a realization has dawned that the halfway concern isn’t rather indomitable. And the ambitious and costly pivot—rebranding Facebook as Meta—has raised much questions than it answered, proving much disruptive than decisive. The institution is owed to merchandise its quarterly net connected Wednesday (Oct. 26) aft marketplace close.

Brad Gerstner’s argument, by the digits

55%: How overmuch Meta’s banal is down successful the past 18 months, compared to an mean of 19% for its big-tech peers

23x to 12x: How overmuch Meta’s stock price-to-earnings ratio has fallen from, present trading astatine little than fractional the mean P/E of peers

25,000 to 85,000: Increase successful Meta’s headcount successful the past 4 years

$45 billion: Meta’s operating nett past year

$10-15 billion: Meta’s yearly concern earmarked into a metaverse task that mostly includes artificial reality, virtual reality, immerse 3D, and Horizon World, which volition instrumentality a decennary to travel to fruition

$30 billion: Meta’s superior expenditure successful 2022, treble from 2018. Excluding its ample metaverse investment, Meta is investing much successful capex than Apple, Tesla, Twitter, Snap, and Uber combined

Quotable

“An estimated $100B+ concern successful an chartless aboriginal is super-sized and terrifying, adjacent by Silicon Valley standards.” —Meta capitalist Brad Gerstner.

How tin Meta “get its mojo” back?

Gerstner recommends a three-step solution for Meta to treble escaped currency travel to $40 cardinal per year.

👩‍💻 Reduce headcount disbursal by astatine slightest 20% by January 2023 to get backmost to mid-2021 staffing levels.

💸 Reduce yearly capex by astatine slightest $5 cardinal from $30 cardinal to $25 billion; and Meta volition inactive beryllium capable to support its halfway business, and support investing industry-leading amounts successful information centers and artificial intelligence

⚠️ Gerstner recommends writes the institution headdress metaverse/Reality Labs investments astatine $5 billion, adding that “I person been told that Amazon spent acold little successful full to physique AWS (Amazon Web Services).”

Silicon Valley’s over-hiring problem

Meta, which has been trying to slim down its workforce with quiescent firing, isn’t unsocial successful feeling the load of having hired excessively galore radical excessively quickly.

“It is simply a poorly kept concealed successful Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could execute akin levels of gross with acold less people,” Gerstner wrote. “I would instrumentality it a measurement further and reason that these unthinkable companies would tally adjacent amended and much efficiently without the layers and lethargy that comes with this utmost complaint of worker expansion.”

In an all-hands gathering a mates months ago, Alphabet and Google main Sundar Pichai lamented, “There are existent concerns that our productivity arsenic a full is not wherever it needs to beryllium for the caput number we have.” While the institution hasn’t announced layoffs, it has resorted to quiescent firing similar Meta. Google has been giving employees 60 days to find caller roles astatine the institution earlier making them redundant—30 other days if their projects were canceled.

Other companies are much overt astir their downsizing decisions: Microsoft is cutting astir 1,000 jobs citing “structural adjustments.” Trading app Robinhood’s CEO admitted the institution “overhired” and fired 23% of its staff. Snap messily laid disconnected 20% of its workforce arsenic its financials took a hit.

Luckily for the axed employees, Gerstner believes they tin easy find different job. “We person a shortage of endowment successful Silicon Valley. Meta and different ample companies person made it precise hard for start-ups to hire,” helium wrote. “We are assured that these employees volition find replacement jobs and rapidly beryllium backmost to enactment connected important inventions that volition determination america each forward.”