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"Twitter's Quitters" Takes On an Entirely New Meaning

By Jamal Carnette, CFA - Jan 27, 2016 at 10:00PM

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After several high-level executive departures, where does Twitter go from here?

Source: Twitter.

The term "Twitter's (TWTR -0.11%) Quitters" apparently extends beyond just users. This week, investors of the microblogging site were treated to the news that four high-level managers are leaving the company. Alex Roetter, senior vice president of engineering; Katy Stanton, vice president of global media; Skip Schipper, vice president of human resources; and Kevin Weil, senior vice president of product development, have all left the organization in what can only be described as a mass exodus.

In response to the news that 40% of the company's executive team had jumped ship, analyst firm Stifel Nicolaus downgraded the company to a "hold" rating. Analyst firm SunTrust Robinson Humphrey, which has been critical of Twitter's management and board of directors in the past, noted that only five executives of the 13 who were there at the beginning of 2015 are still at the company, giving the company a 62% turnover rate. By comparison, Apple had no high-level executive departures during this period and has added to the senior executive team by appointing Jeff Williams to the COO role while adding Johny Srouji as SVP of hardware technologies.

In response, Twitter investors continued to sell off the stock, further adding to the year-to-date losses of nearly 25%. This poor performance follows 2015's nearly 40% drop. Is this another reason to avoid Twitter or a possible blessing in disguise?

The departures appear to be voluntary
To correct what he referred to as "inaccurate press rumors," Twitter CEO Jack Dorsey issued a statement Sunday via a screen shot on his Twitter account. He said these executives "have chosen to leave the company." While wide-scale executive turnover is never a positive, company-initiated departures tend to be more palatable on Wall Street, as they signify that the company understands it's underperforming and has a plan to correct the perceived shortcomings. Even better, though, is announcing a replacement at the moment of a departure to signal both a change in strategy with continuity of leadership. By not doing either, Twitter appears to not have a handle on the situation.

According to Dorsey's public announcement, COO Adam Bain and CTO Adam Messinger will handle the roles of these four jobs, taking on "added responsibilities," which will include having Bain run the HR team "on an interim basis." While Dorsey is quite bullish on both employees, this is asking a great deal of his remaining executive team. Of course, as the CEO of Square (SQ -2.27%) as well as Twitter, Dorsey himself is used to taking on multiple roles. Whether this is a good idea or not is open for debate, but the stock market has harshly judged the results so far -- in addition to Twitter's swooning stock price, shares of Square are down sharply from the $13-per-share figure the company climbed to on the first day of trading a couple of months ago.

Will some high-level talent help the company?
Eventually, this could be a positive for Twitter, if Re/code's report is correct. In addition to reporting the departures, the site is also pointing toward additions to Twitter's executive team. The tech-focused website is reporting that American Express marketing executive Leslie Berland may be joining the beleaguered company as its new chief marketing officer, essentially taking these responsibilities from CFO Anthony Noto.

This is also a test for the Dorsey-led Twitter on two fronts. Last year's CEO search was essentially a comedy of errors, with the board of directors initially appearing to rule then-interim CEO Dorsey out of contention for the position, only to give the him the job after a three-month search period. Quickly filling these roles would go a long way toward restoring Twitter's reputation.

Secondly, this gives the new CEO an opportunity to install his own management team. The departing executives were holdovers from Dick Costolo's time at the helm. If Dorsey is able to establish a high-quality management team, it could further restore confidence. Dorsey faces a tremendous challenge, but is now afforded the opportunity to remake the company as he seems fit.

Jamal Carnette owns shares of AAPL. The Motley Fool owns shares of and recommends AAPL and TWTR. The Motley Fool recommends AXP. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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