Snapchat to cut a fifth of jobs
Snap is planning to lay off approximately 20 percent of its more than 6,400 employees, according to people familiar with the matter.
Snap is cutting about 20 per cent of its workforce, chief executive officer Evan Spiegel said in an internal memo sent to staff Tuesday. The change was necessary because revenue growth of 8 per cent in the current quarter fell short of the company’s initial assumptions.
Snap, which makes a social app popular with young people, has never reported single-digit quarterly revenue growth as a public company, according to Bloomberg data.
Any projects that don’t contribute to growing users and sales or the company’s augmented reality offerings will be cut or receive “substantially reduced investment,” Spiegel said in his memo. “While we will continue our work to reaccelerate revenue growth, we must ensure Snap’s long term success in any environment.”
The shares surged in premarket trading, gaining about 10% and reversing earlier losses.
Snap Inc.’s stock jumped as much as 15% Wednesday after the social-media company confirmed a large reduction in jobs as part of a “broader strategic reprioritization” to slash costs and create positive free cash flow, and disclosed better revenue growth than expected.
Snap SNAP, which began notifying employees affected on Wednesday, said in a regulatory filing the organizational overhaul will incur pretax charges of between $110 million and $175 million for severance and related costs, contract termination costs, and other impairment charges primarily during the third quarter.
“We are restructuring our business to increase focus on our three strategic priorities: community growth, revenue growth, and augmented reality,”
Chief Executive Evan Spiegel said in the filing Wednesday.
“Projects that don’t directly contribute to these areas will be discontinued or receive substantially reduced investment.”