The CEO of Altimeter Capital has written an open letter to Mark Zuckerberg and the Meta board of directors asking them to reduce headcount and to limit investment into the metaverse.
The open letter, which was published on the Medium platform, begins “Dear Mark”, and starts by praising the Meta owner’s track record but then goes on to list a litany of failures, and in order for them to be resolved, makes a call for Meta to “get its mojo back”.
The problem
Signed “Brad”, the letter’s writer accuses Meta of a “drift into the land of excess”, where there are “too many people, too many ideas,” and, “too little urgency”.
The Altimeter Capital CEO writes that when Meta massively increased its spending, it lost the confidence of investors. He compares Meta with its peers by pointing out that its stock is down 55%, while they (the peers) are down an average of 19%. He adds that the Meta P/E ratio has reduced from 23x to 12x, less than half the average of its peers.
The plan
In order to address the problem, the letter suggests a “three step plan”:
- Reduce headcount expense by at least 20%
- Reduce annual capex by at least $5 billion, from $30 billion to $25 billion
- Limit investment in the metaverse/Reality Labs to no more than $5 billion per year
In relation to the head count, the letter highlights how it has risen 3x, from 25,000 to 85,000 in only 4 years. It encourages Meta to “move aggressively” and cut the workforce by at least 20%, which would take it back to mid 2021 levels.
As regards capex, the letter accuses Meta of “dramatically increasing” its capital expenses from $15 billion in 2018, to $30 billion annual capex in 2022. It puts that into perspective by adding that the increase is more than the capex of Apple, Tesla, Twitter, Snap, and Uber combined.
On Meta’s huge investments into the metaverse, the letter makes the following claim:
“the company has announced investments of $10–15B per year into a metaverse project that largely includes AR / VR / immersive 3D / Horizon World and that it may take 10 years to yield results. An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards.”
The letter’s author states that although some of Meta’s metaverse investments are important, even $5 billion might seem an extraordinary amount to any company. The author cites that Amazon spent far less in order to build out AWS.
Conclusion
The conclusion of the letter affirms that should Zuckerberg’s Meta follow the 3 recommendations, then it would lead to “A leaner, faster, more successful Meta”.
The CEO of Altimeter Capital reaffirms his “deep respect for founders that continue to grind, inspire, and invent long after the financial motivation is gone”, and says that he uses Meta’s products on a daily basis.
He writes that nothing he has stated is a “demand”, and that the letter is an opportunity to “engage” and “share thoughts” as “an interested shareholder”. He ends with the offer to “connect” with Zuckerberg and his team.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
