Meta Shareholder Urges Job Cuts, Metaverse Spending Reduction

Meta CEO Mark Zuckerberg is facing investor pushback over its heavy Metaverse spending and the size of its workforce.

This emerged after a critical open letter from Altimeter Capital chairman and CEO Brad Gerstner called on Meta to stop spending so much money on ‘metaverse’ and to slash its workforce.

Last month Zuckerberg signalled that Facebook would be making adjustments in response to the worrying global economic outlook.

Open letter

At the time, Zuckerberg in corporate communications with staff said Meta would freeze hiring and “further restructure” amid an uncertain macroeconomic situation.

The idea was to reorganise teams and reduce headcount for the first time ever, signalling an end of the era of growth at the social networking giant.

It came after it was reported in June that Meta was bracing for a serious economic downturn and had slashed its hiring plans.

Zuckerberg told staff at the time that Meta had cut its plans to hire engineers by at least 30 percent this year, as he warned them to brace for a deep economic downturn.

Now in the open letter addressed to Mark Zuckerberg, Altimeter Capital’s Brad Gerstner said that Meta has too many employees and is moving too slowly to retain the confidence of investors.

“So, its with some hesitation, but significant conviction, I am sharing an open letter strongly encouraging Meta to streamline and focus its path forward,” wrote Gerstner. “Like many other companies in a zero rate world – Meta has drifted into the land of excess – too many people, too many ideas, too little urgency. This lack of focus and fitness is obscured when growth is easy but deadly when growth slows and technology changes.”

“At the same time that Meta ramped up spend, you lost the confidence of investors,” wrote Gerstner. “The conventional wisdom – press and investor – is that the core business hit a wall last fall (Autumn).”

“As a result, the team hastily pivoted the company toward the metaverse – including a surprise re-naming of the company to Meta,” wrote Gerstner. “Worse, this scepticism seemed to be affirmed with a nearly-immediate and sizeable miss in financial results and continued under-performance throughout 2022.”

Remedial action

Meta has said in July 2021 that it intended to spend $10 billion a year for the next decade developing the metaverse, which it sees as the next step for the internet, making it more immersive.

Gerstner however urged Zuckerberg to undertake the following remedial actions:

1. Reduce headcount expense by at least 20 percent;
2. Reduce annual capex by at least $5bn from $30bn to $25bn; and
3. Limit investment in metaverse / Reality Labs to no more than $5bn per year.

“At Meta, the number of employees is up over 3x from 25k to 85k employees in just the last four years!” Gerstner complained.

“As such, we would encourage the company to move aggressively and cut at least 20 percent of employee-related expenses by January 1, 2023,” he wrote. “Why 20 percent? To put that in perspective, it merely takes the company back to mid-2021 levels of employee expense – and I don’t think anybody would argue that Meta wasn’t sufficiently staffed in 2021 to tackle a business that looks similar to how it looks today.”

The open letter to Zuckerberg reflects the level of investor frustration at Meta, which has seen its share price fall over 61 percent in 2022.

Altimeter Capital hold more than 2 million shares of Meta, and the open letter is sign that not all investors are onboard with Zuckerberg’s Metaverse vision of a world of virtual and augmented reality.

Last month Meta announced its new high-end VR headset, called the Quest Pro.

This arrived despite concern that VR or its metaverse apps (i.e. Horizon Worlds) is not catching on with consumers.