In a sharp criticism of Meta CEO Mark Zuckerberg, a key long-term investor in the company has said that the social network needs to reduce more headcounts and stop spending too much on metaverse to get its “mojo back”.
In an open letter on Medium addressing Zuckerberg, Altimeter Capital Chair and CEO Brad Gerstner said that 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.”
On metaverse, he said that people are confused by what the metaverse even means.
“If the company were investing $1-2 billion per year into this project, then that confusion might not even be a problem. You would simply do R&D quietly and investors would focus on the core business and the breakthroughs in AI,” he noted.
Instead, the company has announced investments of $10-15 billion 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 over $100 billion investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards,” Gerstner wrote.
He said that in order to achieve profits, the company needs to reduce headcount expense by at least 20 per cent by January 1, 2023, reduce annual capex by at least $5 billion from $30 billion to $25 billion and limit investment in metaverse/Reality Labs to no more than $5 billion per year.
Zuckerberg has lined up $10 billion in investment for his metaverse dream.
Gerstner said that in the last 18 months, Meta stock is down 55 per cent (compared to an average of 19 per cent for its big-tech peers).
“Meta’s core business is one of the largest and most profitable in the world with over $45 billion in operating profits last year alone. Moreover, Meta has industry leading capabilities in key future technologies like artificial intelligence and immersive 3D that will help drive new products and future growth,” Gerstner noted.
Meta has abundant financial resources to invest and or return to shareholders, he added.
At Meta, the number of employees is up over three times, from 25,000 to 85,000 employees in just the last four years.
“After all, why not hire more people and invest in more things when the cost of capital was near zero and growth seemed unlimited?” Gerstner asked Zuckerberg.
On reducing headcounts, he said that Meta and other large companies have made it very difficult for startups to hire.
“We are confident that these employees will find replacement jobs and quickly be back to work on important inventions that will move us all forward,” Gerstner said.