Oct 27, 2015 5:56 PM

Twitter's 3Q report illustrates challenges facing new CEO

The Associated Press

SAN FRANCISCO (AP) Twitter's latest financial report conveyed a succinct message: CEO Jack Dorsey has his work cut out as he tries to attract more people to one of the Internet's most influential means of communications.

The challenges facing Dorsey came into sharper focus with Tuesday's release of Twitter's results for the three months ending in September. The numbers covered a stretch when Dorsey was serving as interim CEO before Twitter hired him on a permanent basis a month ago.

Twitter ended the third quarter with a core audience of 307 million active users, an increase of just 3 million from June. That wasn't much better than a gain of 2 million users in the previous quarter, a letdown that led to the departure of Twitter's previous CEO, Dick Costolo.

Revenue climbed 58 percent from last year to $569 million.

Twitter still lost $132 million, extending the company's uninterrupted history of losses since Dorsey co-founded the service nearly a decade ago. The San Francisco company has now accumulated losses of about $2 billion.

It doesn't look like Twitter is going to regain a lot of momentum in the current quarter, which ends in December. The company projected its revenue will range from $695 million to $710 million in the period, missing a target of $749 million set by analysts surveyed by Zacks Investment Research.

The evidence of Twitter's ongoing malaise reversed a recent rally in Twitter's stock, which reflected investor optimism of a quick turnaround under Dorsey's leadership.

Twitter's stock plunged $3.69, or nearly 12 percent, to $27.65 in extended trading after the report came out.

Although it remains still commands a large audience, Twitter has been having trouble attracting more traffic since its initial public offering of stock two years ago. Facebook and other rival services have been faring far better over that time.

Dorsey has vowed to come up new ways to make Twitter more appealing and easier to use for people who have been turned off by the service's chronological presentation of posts and sometimes-confusing quirks, such as its reliance on hashtags.

Twitter recently rolled out one of its biggest changes in years with a new channel that bundles video, photos and links to news stories to make it easier for people to find hot topics of discussion without need to figure out whom to follow to receive updates. The new feature, called Moments, was developed while Costolo was still CEO.

"Twitter is getting easier to use every single week," Dorsey assured analysts during a Tuesday conference call reviewing the third quarter.

As part of its effort to lure more people to write and read tweets, Twitter is launching a marketing campaign that will include television commercials scheduled during Tuesday evening's World Series opener.

Dorsey also has signaled his resolve to make Twitter profitable by laying off 336 employees, or 8 percent of the company's workforce, earlier this month.

This is Dorsey's second stint as Twitter's CEO. The company ousted him in 2008 after concluding he wasn't the best person to run Twitter as the service matured. He is among a group of 69 CEOs at publicly held companies in their second tenure on the job, according to the research firm Equilar.

"Getting Dorsey back on board may help Twitter define its vision," said IHS Technology analyst Eleni Marouli.

Dorsey, though, isn't devoting all his attention to Twitter, an issue that worries some investors. He is also running Square, a payment processing company that is now trying to complete its own IPO.

"He certainly has his hands full with Twitter," said James Gellert, CEO of the research firm Rapid Ratings.


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