The firm revealed its intention to lay off 6% of its personnel. This decision about layoff of around 600 people came on Monday morning, following a difficult year for the company in which Spotify shares lost more than two-thirds of their value.
As usual, mass lay-offs are bullish for the stock price, pushing it 5% higher to 4-month highs above $100. Daniel Ek, the founder and CEO of Spotify, stated that the firm would be making the “difficult but essential choice” to downsize its workforce.
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Ek stated that Spotify will lower expenses in the face of an uncertain economic outlook since the company had grown too rapidly by relying on ongoing “pandemic tailwinds.”
In addition to employee reductions, Spotify announced reorganizing its leadership team, with Gustav Soderstrom and Alex Norstrom becoming co-presidents. Soderstrom will also serve as chief product officer, while Norstrom will assume the job of the chief business officer. Dawn Ostroff, chief content officer, and advertising business officer, will depart.
Focus on earnings
Spotify’s latest earnings report was somewhat disappointing on the bottom line, as the platform announced a greater-than-anticipated loss of $0.99 per share and another quarter of sliding gross margins, which came in at 24.7% compared to forecasts of 25.0%.
Spotify is scheduled to release its financial results for the fourth quarter on Tuesday, January 31st, before the market opens. Last week, Alphabet GOOGL, the parent company of Google, joined the expanding list of giant technology corporations reducing headcount in response to a decline in consumer demand and advertising sales.