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Source:
https://fortune.com/europe/2024/04/23/spotify-earnings-q1-ceo-daniel-eklaying-off-1500-spotify-employees-negatively-affected-streaming-giants-operations/amp/?utm_source=fark&utm_medium=website&utm_content=link&ICID=ref_fark

Spotify CEO Daniel Ek surprised by how much laying off 1,500 employees
negatively affected the streaming giant’s operations
Ek said Spotify employees were doing too much "work around the work" as
he laid off 17% of the group's workforce in December.
BY Ryan Hogg
April 23, 2024 9:22 AM EDT

When Spotify announced its largest-ever round of layoffs in December,
CEO Daniel Ek hailed a new age of efficiency at the streaming giant. But
four months on, it seems he and his executives weren’t prepared for how
tough filling in for 1,500 axed workers would be.

The music streamer enjoyed record quarterly profits of €168 million
($179 million) in the first three months of 2024, enjoying double-digit
revenue growth to €3.6 billion ($3.8 billion) in the process.

However, the company failed to hit its guidance on profitability and
monthly active user growth.

It didn’t seem to put off investors, who sent shares in the group
soaring more than 8% in New York after markets opened Tuesday morning.
Layoffs hit Spotify’s guidance

Still, as he addressed those investors following the latest earnings
release, Ek didn’t shy away from the obstacles that stopped the streamer
from hitting some of its targets this year.

In addition to surprisingly successful 2023 growth to compare against
and the impacts of falling marketing spend, Ek blamed operational
difficulties linked to staffing for the group missing its earnings
target to start the year.

In December, Spotify culled 1,500 jobs, equivalent to 17% of employees,
as part of an aggressive efficiency drive as the group strived for
profitability.

Staff costs for those employees carried a long tail, as most workers
received five-month severance packages when they were let go in December.

At the same time, the footprint left behind by those employees was
bigger than Ek and his executives anticipated.

“Another significant challenge was the impact of December workforce
reduction,” Ek said on an investors call following Spotify’s Q1 earnings
release.

“Although there’s no question that it was the right strategic decision,
it did disrupt our day-to-day operations more than we anticipated.

“It took us some time to find our footing, but more than four months
into this transition, I think we’re back on track and I expect to
continue improving on our execution throughout the year getting us to an
even better place than we’ve ever been.”

Ek didn’t elaborate on what aspects of operations were most affected by
the layoffs.
Layoffs right decision?

Back in December as the platform he founded faced persistent losses and
a falling share price, Spotify CEO Ek used a well-trodden path by tech
giants to steer the ship around: mass layoffs.

“We still have too many people dedicated to supporting work and even
doing work around the work, rather than contributing to opportunities
with real impact,” Ek said in a memo as he announced he would be cutting
his workforce by 17%.

Investors initially reacted well to the news, though skeptical voices
asked whether the move merely put a sticking plaster over
harder-to-solve issues at the group, particularly its low margins thanks
to the costs of bumper record deals.

However, it appears to have worked so far. In the four months since the
layoff announcements, shares in the group have jumped more than 60%.

Spotify has also recently proved it is able to raise prices in some of
its key markets without seeing a flight of listeners to rival services
like Apple Music.

In the long run, Spotify and Ek also remain convinced the tough round of
layoffs has set Spotify up for long-term profitability.

The apparent collective surprise at how that can affect operations in
the short run, though, marks a dash of hubris for the newly bullish
streaming group.

--
microblog: https://dice.camp/@kyonshi
macroblog: https://gmkeros.wordpress.com
pictures: https://portfolio.pixelfed.de/kyonshi

On Thu, 25 Apr 2024 00:09:54 +0200, Kyonshi wrote:

> However, the company failed to hit its guidance on profitability and
> monthly active user growth.
>
> It didn’t seem to put off investors, who sent shares in the group
> soaring more than 8% in New York after markets opened Tuesday morning.

That happens all too often. Wall Street really seems to love the sound of
the word “layoff”. Lots of companies enjoy a short-term boost to their
share price, even at the cost of long-term damage to their business.

On 4/25/2024 7:42 AM, Lawrence D'Oliveiro wrote:
> On Thu, 25 Apr 2024 00:09:54 +0200, Kyonshi wrote:
>
>> However, the company failed to hit its guidance on profitability and
>> monthly active user growth.
>>
>> It didn’t seem to put off investors, who sent shares in the group
>> soaring more than 8% in New York after markets opened Tuesday morning.
>
> That happens all too often. Wall Street really seems to love the sound of
> the word “layoff”. Lots of companies enjoy a short-term boost to their
> share price, even at the cost of long-term damage to their business.

which is weird because the share price should be tied to long-term
profitability and not stock gains. The whole stock market sometimes
seems to run on nothing but belief in strange mantras and not in actual
companies.

--
microblog: https://dice.camp/@kyonshi
macroblog: https://gmkeros.wordpress.com
pictures: https://portfolio.pixelfed.de/kyonshi

On Thu, 25 Apr 2024, Kyonshi wrote:

> On 4/25/2024 7:42 AM, Lawrence D'Oliveiro wrote:
>> On Thu, 25 Apr 2024 00:09:54 +0200, Kyonshi wrote:
>>
>>> However, the company failed to hit its guidance on profitability and
>>> monthly active user growth.
>>>
>>> It didn’t seem to put off investors, who sent shares in the group
>>> soaring more than 8% in New York after markets opened Tuesday morning.
>>
>> That happens all too often. Wall Street really seems to love the sound of
>> the word “layoff”. Lots of companies enjoy a short-term boost to their
>> share price, even at the cost of long-term damage to their business.
>
>
> which is weird because the share price should be tied to long-term
> profitability and not stock gains. The whole stock market sometimes seems to
> run on nothing but belief in strange mantras and not in actual companies.
>
>
>
Well, you should be thankful. We buy on dips and sell on highs. If the
market would be rational, those wonderful opportunities would not popup as
often.

Add to that, the predictability of interesting cycles, and you have quite
a nice little recipe there to make some extra $ in the markets. =)

In article <v0d22f$2sv2v$3@dont-email.me>, Kyonshi <gmkeros@gmail.com> wrote:
>
>which is weird because the share price should be tied to long-term
>profitability and not stock gains. The whole stock market sometimes
>seems to run on nothing but belief in strange mantras and not in actual
>companies.

Yes. I blame high speed trading for this.
--scott
--
"C'est un Nagra. C'est suisse, et tres, tres precis."