Publisher's Note: This post appears here courtesy of the The Daily Wire. The author of this post is Ben Zeisloft.
Altimeter Capital Management pressed Meta CEO Mark Zuckerburg to reform the company's hiring practices and focus on core competencies in a Monday investor letter.
Meta, formerly known as Facebook, changed its name last year to highlight a pivot toward developing the metaverse, an immersive virtual reality that the company believes will serve as the next phase of digital communication. The letter, addressed to Zuckerberg and Meta's board of directors, said that the firm has drifted into a "land of excess"
and "lack of focus and fitness."
"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,"
the letter, written by Altimeter CEO Brad Gerstner, asserted. "Worse, this skepticism seemed to be affirmed with a nearly-immediate and sizable miss in financial results and continued under-performance throughout 2022."
Share prices for Meta have fallen over 61.7% since the beginning of the year, significantly trailing the Dow Jones Industrial Average and the technology-heavy NASDAQ, which have fallen 13.9% and 30.8% respectively. Gerstner suggested a three-step plan centered upon reducing at least one-fifth of headcount expenses, slashing yearly capital expenditures by at least $5 billion, and pouring no more than $5 billion into annual metaverse initiatives.
The letter noted that Meta had more than tripled its workforce from 25,000 people to 85,000 people over the past four years. "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. "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."
Indeed, technology companies were among the first to lay off large numbers of employees when the stock market began its most recent decline. Elon Musk, who is slated to purchase Twitter, reportedly plans to cut headcount at the social media company from 7,500 to 2,000.
Jettisoning one-fifth of employee-related expenses would bring Meta to human capital seen toward the middle of last year. "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,"
The financier also contended that the sudden pivot toward the metaverse has "led to much confusion"
since most people do not know what the concept "even means."
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 focus on the company's core business and breakthroughs in artificial intelligence, which Meta will be "well positioned to help invent and monetize."
Unlike other investor letters, which may push certain reforms to more effectively maximize shareholder value, Altimeter, which retains a 0.1% stake in Meta, said that no demands came attached to the message. "We simply wanted to further engage and continue sharing our thoughts as an interested shareholder,"
Gerstner concluded. "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."