Twitter's China Managing Director Kathy Chen Steps Down

Twitter Inc.’s TWTR China managing director, Kathy Chen has called it quits, eight months after joining Twitter.

Per media reports, Chen’s appointment was “controversial” given her ties with People’s Liberation Army (PLA). Chen announced her resignation in several tweets. She also added that with “Twitter APAC team directly working with Chinese advertisers, it was right time for me to leave the company.” She also added that the advertiser base in Greater China has grown 400% over the last two years and now all of China ad sales and support activities are being moved to APAC headquarters in Singapore.

Twitter is banned in mainland China but is available in Hong Kong and Taiwan.

Twitter continues to face mass managerial departure. Chen’s resignation comes on the heels of the departure of Twitter’s chief technology officer, Adam Messinger and its VP of product, Josh McFarland in December. Last year, Twitter lost some very high profile executives. In November, Anthony Bain, its COO, stepped down from his position in order to pursue “new opportunities”. Bain had been associated with Twitter since 2010. Chief financial officer Anthony Noto will take over Bain’s responsibilities while Twitter searches for a new CFO.

Earlier in 2016, Twitter media head Katie Jacobs Stanton, product head Kevin Weil, engineering division head Alex Roetter, and HR head Brian ‘Skip’ Schipper quit the company. Vine manager Jason Toff also resigned and headed back to Google. In May, it was reported that the chief of business development, Jana Messerschmidt and chief of media and commerce Nathan Hubbard, were also quitting.

The loss of key personnel is very concerning as Twitter is passing through one of its toughest phases. User growth is sluggish, profit is yet to be earned and amid all this ad revenue growth is decelerating. Over the past one year, shares of Twitter are down 27.75% compared with 5.18% decline in the Zacks categorized Internet Software industry. 

Investors have been on the edge for quite some time now and one can hardly blame them given the dismal share price movement and unimpressive user growth rate. Last year, we saw heightened buyout speculations for Twitter, which fizzled later on, much to investors’ dismay. Right from Alphabet GOOGL to Salesforce CRM to The Walt Disney Company DIS, all were speculated to have shown interest in buying the micro blogging site but reportedly pulled out.

A hefty price tag was widely considered to be the major reason behind the withdrawal of once-interested suitors apart from flailing user growth and advertising revenues. Not to forget, the infamous instances of trolling that have been said to scare away interested buyers.

Twitter’s CEO Jack Dorsey has a Herculean task of pacifying agitated investors. With no potential suitor in sight, Twitter needs to work single-handedly to bring about that ever elusive turnaround. We believe that focus on live and user friendly changes could do the trick for Twitter but it is going to be time consuming.

Also, Twitter is slashing 9% of its workforce. Layoffs had long been anticipated as the company intends to chart a solo strategy to turnaround things. It’s a no-brainer that cost cutting will be an integral part of the strategy.

At present, Twitter carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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