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In an open letter to Meta Platforms (NASDAQ:META) on Monday, Altimeter Capital Chair and CEO Brad Gerstner said that the social media and metaverse company needs to get its mojo back and re-build confidence with investors through a reduction in headcount, Capex and limiting investment in the metaverse.
Gerstner recommends that Meta reduce its headcount expense by at least 20%, lower annual Capex by at least $5 billion from $30 billion to $25 billion, and limit investment in its metaverse/Reality Labs division to no more than $5 billion per year.
“Meta needs to re-build confidence with investors, employees and the tech community in order to attract, inspire, and retain the best people in the world. In short, Meta needs to get fit and focused,” explained Gerstner. He added that the 20% cut in employee-related expenses would take Meta back to mid-2021 levels of employee expense.
Meta shares are down more than 62% in 2022 and over 3% on Monday, and investors are becoming increasingly concerned with its performance.
Meta’s metaverse switch hasn’t been smooth sailing, with reports recently stating that it is failing to reach its user target for its metaverse app Horizon Worlds. The company has previously said it is working on user retention for its VR headsets.
“While the increased AI investment was clearly well timed, Meta’s investment in the metaverse, while smaller than the AI investment, has gotten the most attention and has led to much confusion. Perhaps it was the re-naming of the company to Meta that caused the world to conclude that you were spending 100% of your time on Reality Labs instead of AI or the core business,” continued Gerstner. “People are confused by what the metaverse even means. If the company were investing $1–2B per year into this project, then that confusion might not even be a problem.”
The Altimeter Capital CEO explained that while he believes Meta should be investing in the metaverse, the large amount it is investing in “in an unknown future is super-sized and terrifying.”
“We think the recommendations outlined above will lead to a leaner, more productive, and more focused company — a company that regains its confidence and momentum,” he added.
