Snap Inc (NYSE:SNAP) is in the last stage of its restructuring as the company is expected to lay off around 100 people from its advertising division. This is the third and final round of job cuts and the company expects it will save $34 million per year in costs.
Whether layoffs are a good or a bad sign depend in large part for the reason behind them. If it’s due to efficiencies that have been gained then that’s a good reason for job cuts, but if it’s because the company was inefficient and had too much staff to begin with, then that could be indicative of poor management.
In Snap’s case, it’s the latter that is the most likely scenario and it’s also why we might see more restructuring in its future. The company has been deep in the red and is still nowhere near profitable. While Snap has been able to grow its top line, the stock has struggled and the share price has declined 30% in the past year after initially seeing a very positive reaction to its IPO.
Since then, questions have come up surrounding Snap’s numbers relating to user growth, whether tech giants Facebook, Inc. (NASDAQ:FB) and Alphabet Inc (NASDAQ:GOOG) could copy its key features, and the app’s recent design change has also frustrated users.
Much of what’s been fueling Snap’s growth has been its popularity, and that’s what the company needs to focus on to drive the stock price up further. The company is not going to become profitable anytime soon, and a $34 million savings will do little to accelerate that.
