Andrew Burton Getty Images
By Leena Rao
June 11, 2015

Embattled Twitter CEO Dick Costolo, who revealed late Thursday his plans to step down, insisted his departure had nothing to do with the company’s disappointing financial performance. Rather, he said it was just time to go and that leaving without a full-time replacement – a telltale sign of trouble – was for the best.

“The scrutiny of the company would intensify if I remained CEO while the search process takes place,” Costolo said on a conference call.

He’s right about the scrutiny. Investors have been agitating against his leadership and the company’s direction for some time. Twitter’s outsized profile as an online bulletin board is in stark contrast to Twitter, the underwhelming business.

Although the company has 302 million monthly active users, an 18% increase over last year, that pace of growth is short of investor expectations. As Fortune’s Erin Griffith reported earlier this year, Costolo has been pushing Twitter’s product improvements to increase use and lure users back to the service, but the results are mixed.

While Twitter’s first quarter revenue came in at $436 million, an increase of 74% over last year, the amount fell below analyst expectations and the company’s guidance. The company lost $162 million during the quarter.

 

Costolo, who led Twitter for six years, will be succeeded on an interim basis starting on July 1 by co-founder and Chairman Jack Dorsey, who is also CEO of the payments company Square. It will be Dorsey’s second time as Twitter’s CEO after having served in that role early in the company’s history until he was unceremoniously pushed from day-to-day leadership and into the chairman’s slot.

Dorsey, who was also on the call, described the search for Costolo’s replacement as purposeful while adding that the company is looking for someone “who uses and loves the product in every way.” In a press release, Twitter said that it has formed a CEO search committee that includes board member Peter Currie, Twitter co-founder Evan Williams and early investor and Benchmark partner Peter Fenton.

The company will be evaluating both internal and external candidates. Likely internal candidates are CFO Anthony Noto and Adam Bain, Twitter’s global president of revenue.

Dorsey said he was committed to Twitter’s existing product roadmap and made no mention of any major change in direction under his temporary watch. In particular, he praised Periscope, a live streaming app that Twitter acquired in March, and Fabric, a tool for mobile app developers.

In a defense of Costolo, Dorsey said that his departure had nothing to do with the recent earnings report. “This transition is not the result of anything more than Dick deciding to move on as CEO, and there’s no connection with our financial results.” Costolo, who said he would get no severance, will remain on Twitter’s board.

In keeping with the love-fest, Costolo gave Dorsey his seal of approval for taking on the interim job, saying that he “is extremely confident in Jack as a leader.”

Costolo said on the call that he initiated talks with Twitter’s board to step down as early in late 2014 and then again in February of this year. He said he brought the topic up again last week.

In response to a question by an analyst about a possible acquisition of the Twitter, Costolo hedged. “Obviously we are committed to maximize shareholder value,” he said. “We see no reason why we can’t do that as an independent company, but the board has a fiduciary duty and will carefully evaluate any offer.”

Dorsey will be in the unusual and challenging position of leading two companies at the same time. But he argued that he is helped by strong leadership teams at both of them.

Shares of Twitter (TWTR) rose as much as 7% in after hours trading after the announcement of Costolo’s departure. They settled up around 4%, showing just how ready investors are for a change.

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