In a letter to investors on Monday, Altimeter Capital Management urged Meta CEO Mark Zuckerburg to change the business’ hiring procedures and place a greater focus on core competencies.
According to the letter, which was addressed to Zuckerberg and Meta’s board of directors, the company has devolved into a “land of excess” with a “lack of focus and fitness.”
Last year, Meta, formerly known as Facebook, changed its name to emphasize a shift toward developing the metaverse, an immersive virtual reality that the company believes will usher in the next phase of digital communication.
Altimeter CEO Brad Gerstner asserted in the letter that said, “At the same time that Meta ramped up spend (sic), you lost the confidence of investors. The conventional wisdom — press and investor — is that the core business hit a wall last fall. As a result, the team hastily pivoted the company toward the metaverse — including a surprise re-naming of the company to Meta, Worse, this skepticism seemed to be affirmed with a nearly-immediate and sizable miss in financial results and continued under-performance throughout 2022.”
Gerstner proposed a three-step strategy that included cutting headcount costs by at least one-fifth, cutting annual capital expenditures by at least $5 billion, and investing no more than $5 billion annually in metaverse initiatives. Since the start of the year, Meta’s share prices have dropped more than 61.7%, far behind the Dow Jones Industrial Average and the heavily tech-weighted NASDAQ, which have fallen 13.9% and 30.8%, respectively.
“It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people,” Gerstner said, as the letter stated that Meta had more than tripled its workforce from 25,000 to 85,000 in the previous four years.
“I would take it a step further and argue that these incredible companies would run even better and more efficiently without the layers and lethargy that comes with this extreme rate of employee expansion,” he added.
Elon Musk, who is set to buy Twitter, is said to be planning to reduce the company’s headcount from 7,500 to 2,000, indeed, when the stock market began its most recent decline, technology companies were among the first to lay off large numbers of employees.’
Gerstner continued, “I don’t think anybody would argue that Meta wasn’t sufficiently staffed in 2021 to tackle a business that looks similar to how it looks today,” Meta would return to the level of human capital seen in the middle of last year by eliminating one-fifth of employee-related costs.
Rather than pouring between $10 billion and $15 billion into developing new metaverse technologies each year, Gerstner suggested slowing such expenditures to no more than $5 billion per year while investors concentrate on the company’s core business and advancements in artificial intelligence, which Meta will be “well positioned” to benefit from. The financier also claimed that the abrupt pivot toward the metaverse has “led to much confusion” since most people do not know what the concept “even means.”
“We simply wanted to continue engaging and sharing our thoughts as an interested shareholder,” Gerstner said, although Altimeter still owns a 0.1% stake in Meta, they claimed that no demands were made in this one even though other investor letters may push for changes to better maximize shareholder value.
“We believe in this team. We know Meta has more reach, more relevance, and more incredible opportunities for growth than almost any platform on the planet,” Gerstner concluded.
Sources: Dailywire, Economictimes, Barrons
