Meta must slash metaverse spending, headcount to ‘get mojo back’, shareholder says

The chief executive of Altimeter Capital Management, which owns 2.5 million shares of Meta, said the company should double cash flow to US$40 billion a year

Facebook changed its name last year to Meta, heralding the company’s intent to stake its future on a new computing platform where people congregate online

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Mark Zuckerberg, chief executive of Meta Platforms, demonstrates the Meta Quest Pro during the virtual Meta Connect event in New York on October 11, 2022. Photo: Bloomberg

Published: 11:30am, 25 Oct 2022Updated: 1:37pm, 26 Oct 2022

About a year after Facebook changed its name to Meta Platforms to highlight its new focus on the metaverse, long-term shareholder Altimeter Capital Management has called on the company to rein in its spending on the bet.

Meta has lost focus and its shares are underperforming peers, Brad Gerstner, chief executive of the investment firm, wrote in a blog post. The firm holds 2.5 million shares representing 0.11 per cent of outstanding stock, Bloomberg data show. Meta shares dropped 3.4 per cent to US$125.62. in New York on Monday morning. They are down 63 per cent this year, compared with a drop of about 30 per cent in the Nasdaq 100 Index.

The name change heralded the company’s intent to stake its future on a new computing platform where people will congregate and communicate in a virtual environment. But with revenue growth slowing it’s already had to cut costs and freeze hiring to cope with a fierce competition for users’ attention.

“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,” he wrote. “Meta needs to get its mojo back.”

To double free cash flow to US$40 billion a year the company must reduce headcount expense by at least 20 per cent, cut annual capex by at least US$5 billion, to US$25 billion, and limit investment in the metaverse and Reality Labs to no more than US$5 billion a year, Gerstner wrote.

The firm’s recommendations “will lead to a leaner, more productive, and more focused company – a company that regains its confidence and momentum,” he said. “We believe in this team.”