After Killing Twitter Stock Gain, Dorsey Wins Praise

In his first earnings call with investors as head of a public company, Jack Dorsey decided to go for candid.

With the stock up on Twitter Inc.’s second-quarter revenue exceeding expectations, the interim chief executive officer didn’t self-congratulate or dwell on past successes but talked bluntly about Twitter’s shortcomings. That killed the stock gain -- but may have helped build much-needed trust with investors.

“I like that he speaks directly,” said Rob Sanderson, an analyst at MKM Partners. “I think he’s doing very well.”

Twitter dropped 15 percent to $31.24 at the close in New York. The stock had risen 1.9 percent this year through Tuesday. Rival Facebook Inc. soared 22 percent in the same period.

On a live-stream via the Twitter-owned Periscope app, Dorsey began by expressing frustration with the company he co-founded, saying product announcements “have not yet had meaningful impact on growing our audience,” which he called “unacceptable.” He also said Twitter hasn’t “done a great job at aligning the entire company” around its strategy.

The call was a test for the 38-year-old billionaire, who also runs Square Inc. If he stays in the top job at Square, he could soon regularly be speaking to Wall Street: The mobile-payments company, which he also co-founded, has filed a confidential registration to go public, sources familiar with the matter have said. If he leaves Square, he could be in the running to be Twitter’s permanent CEO again, which friends have said is something he wants.

Dorsey had gone into Tuesday’s performance with a rocky reputation as the public face of his companies. For some, he vastly improved his grade. “He provided one of the most cohesive explanations of Twitter’s mission as well as challenges we’ve heard in a long time,” said James Cakmak, with Monness Crespi Hardt & Co.

Trimmed Beard

For his part, Dorsey said afterward in an interview that he enjoyed his debut. “I relish any opportunity to tell our story,” he said. “I think we are communicating where we are presently, that we understand our challenges ahead.”

One of his recent television appearances, on CNBC in June after the announcement of his return to Twitter, got one-star reviews -- and not only because he sported a full mountain-man beard, which even his mother disapproved of, with a post on Twitter. On Tuesday, the beard was neatly trimmed.

He came off as unenthusiastic on CNBC, his critics said, and came out as supportive of sticking with Twitter’s strategy, which is not what investors wanted to hear about a company under pressure to improve its results.

“He took that interview a little too lightly,” said Robert Peck, an analyst at SunTrust Robinson Humphrey. Tuesday “was a chance for him to be more articulate in his strategy and vision for the company, and clarify some of the comments he made before about staying the course at Twitter.”

‘Blank Slate’

The call was revealing for those who may only know what they’ve read about Dorsey as a Silicon Valley celebrity who idolizes Steve Jobs and has a penchant for skinny suits. (His outfit Tuesday, however, included a beige hoodie.)

On Wall Street, “he has a blank slate,” said Brian Wieser, an analyst at Pivotal Research Group, before the Twitter earnings release. “When we listen to calls, we’re looking for not just what CEOs say, but how they say it. We don’t have clues on what to look for with Dorsey.”

Wieser said after hearing him on the call that there still wasn’t “much to read into yet.”

Since its November 2013 initial public offering, Twitter has taken different paths to try to boost its credibility with Wall Street as its results lagged. Investors had heard different descriptions of exactly what the social-media company was, even its metrics and potential.

Dorsey’s honesty Tuesday was a better approach, said Victor Anthony, an analyst with Axiom Capital Management. “We appreciate the candor.”

As for the search for a permanent CEO, Dorsey said on the call that there would be an update when there was something “meaningful” to report.

In the interview, he dodged questions about whether he wants to head Twitter or stick around at Square, saying, “I’m going to do what I think is best for both companies.”

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