Why Is Twitter (TWTR) Cutting Engineers? Rumored Layoffs Have Wall Street Confused

Twitter may boot some engineers from the nest this week. The speculated department culling, which was preceded by Twitter executing product changes at a faster rate than ever before and bringing back co-founder and product visionary Jack Dorsey as permanent CEO, has Wall Street investors and analysts confused by the company’s strategy.

“It is important to run a tight ship, but simply cutting jobs is often the action of a company that does not know what else to do,” wrote Richard Windsor, an analyst at Edison Investment Research, in a note Monday.

It is unclear where exactly the cuts will be made. The companywide layoffs were first reported by Re/code Friday, citing multiple anonymous sources. Twitter declined to comment on the report. Sources said the company will undergo downsizing and the cuts will affect several departments, including engineering.

The organizational reshuffling has been portrayed by analysts as one of Dorsey’s first moves back at the helm. But just last week he oversaw the release of Twitter’s highly anticipated “Project Lightning” initiative, now known as Moments. Dorsey, along with recently promoted Chief Operating Officer Adam Bain, also hosted an event in New York City for marketers called Video Now.

The team announced a new revenue sharing model for Twitter video and pre-roll ad options as the site competes with Facebook and YouTube for video consumption and video ads.

The market did not show much enthusiasm Monday for Twitter’s efforts. Twitter Inc. (NYSE:TWTR) opened at $30.32 per share, down from $30.85 on Friday, and has fallen by nearly 5 percent in morning trading. In contrast, shares rose by nearly 3 percent Oct. 5 following the announcement of Dorsey being named permanent chief.

“What I would have preferred to see is the removal of engineers from the mature part of the business and their re-employment on the big new strategy that will bring Twitter back to growth,” Windsor wrote. “Simply getting rid of them makes it look like the big new strategy to return Twitter to growth does not exist.”

Some engineers could indeed be moved to Twitter Moments. The company currently has more than 4,100 employees working across more than 35 offices, according to the New York Times.