Please ensure Javascript is enabled for purposes of website accessibility

Could Twitter, Inc's Interim CEO Jack Dorsey Pull Off Double Duty?

By Tim Brugger - Oct 1, 2015 at 2:31PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Uncertainty about the CEO position isn’t the only concern investors have with the tweet master, but it’s near the top of the list.

When Jack Dorsey, co-founder and current CEO of mobile payments up-and-comer Square, took over as Twitter (TWTR 1.89%) CEO earlier this year, he made one thing abundantly clear: He would not, under any circumstances, leave his post at Square. Dorsey's stance seemed to emphasize the "interim" part of his CEO status at Twitter, of which he is also a co-founder.

What Dorsey didn't say back in June when he reiterated his position regarding Square could prove to be the most critical aspect of his hard-line statement regarding his role with Twitter. Dorsey didn't say his CEO role at Twitter couldn't become permanent, he simply made it clear he would not leave the same position at Square. In other words, Dorsey subtlety left the door open to run both companies simultaneously.

A dual CEO role may seem like a stretch, but it appears momentum is gathering to endorse Dorsey to do just that. Given Twitter's many challenges -- its stock price is down about 28% in the last three months, as of this writing, because of its many hurdles to overcome -- it's safe to say not everyone would be enamored with the notion of Dorsey splitting time between Twitter and Square.

Bumps in the road
To Dorsey's credit, he didn't try to sidestep Twitter's biggest problem when he shared its Q2 earnings news: growing its monthly active user (MAU) base. Often times, CEOs -- interim or not -- sugarcoat poor results with a lot of rah-rah noise and an emphasis on what's working, ignoring what investors and industry pundits recognize as shortcomings.

That wasn't so last quarter, as was evident when Dorsey said, "Our Q2 results show good progress in monetization, but we are not satisfied with our growth in audience." He got it right, on both counts. Twitter's $502 million in sales in Q2 was an impressive 61% jump from the year-ago quarter. On a non-GAAP basis (excluding one-time items), earnings per share (EPS) also popped, to $0.07 a share compared to just $0.02 last year.

Twitter's sound revenue growth should continue this quarter and year based on forecast sales of between $545 million and $560 million in Q3, and annual revenue of $2.2 billion to $2.27 billion. To put those results in perspective, Twitter generated $1.4 billion in revenue last year. That's the good news.

The not-so-good news is the aforementioned MAU growth, or, more specifically, the lack thereof. In terms of actual MAUs gained in Q2, Twitter increased its user base by a mere 2 million sequentially to 304 million. When stacked up against Faceboo, acomparison that may be unjust but is unavoidable nonetheless, Twitter's anemic user growth really hurts.

As big as Facebook is, it was still able to add 50 million MAUs sequentially, from 1.44 billion in Q1 to 1.49 billion last quarter. It's no wonder sluggish MAU growth has been a bane of Twitter's existence for so long now.

Word has it
Rumor has it Dorsey has become the front-runner to take over the helm at Twitter, in addition to his CEO duties with Square. Several of Twitter's largest shareholders have publicly proclaimed Dorsey as "the man," and even a few board members are beginning to warm to the idea.

Initially, Twitter's board of directors was opposed to a permanent head honcho unable to make a "full-time commitment" to the job. That hard-line stance appears to be easing, and combined with Twitter's lack of progress in finding a replacement for former CEO Dick Costolo, it appears Dorsey may soon remove the "interim" from his title. The question is whether a CEO splitting time between two companies can turn the negative tide Twitter has found itself in.

As a Twitter co-founder, there's little doubt Dorsey's heart would be in the right place. Already, Dorsey is considering doing away with Twitter's vaunted 140-character limit -- a move panned by some, loved by others -- demonstrating he's willing to explore what many would consider radical changes to get things jump-started. Problem is, overcoming the challenges Twitter is facing -- a glance at its share price says it all -- requires a full-time commitment, even for someone as skilled and emotionally invested as Dorsey.

 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Twitter, Inc. Stock Quote
Twitter, Inc.
TWTR
$39.41 (1.89%) $0.73

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
321%
 
S&P 500 Returns
111%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.