With Twitter hemorrhaging $3 million in losses every day, Elon Musk is now considering whether to eliminate critical IT infrastructure to save costs.
After a Delaware judge cornered Musk into acquiring the social media platform for the full offer price of $44 billion following a failed attempt to back out, the new owner—whose actual day job is running Tesla—is fervently looking for ways to trim fat and raise revenue.
In addition to charging verified users a monthly subscription fee to remain protected from imposters and other bad actors, Musk has now instructed subordinates to save $1 billion even if that means cutting down on physical or virtual computing power reserved for managing periods of high traffic spikes, according to a report by Reuters.
Twitter is now looking to find between $1.5 million and $3 million of daily IT spending trims that could include eliminating spare servers and Google Cloud capacity as part of a “Deep Cuts Plan.”
This would go a long way to eliminating the $3 million Twitter is losing each day “with all spending and revenue considered,” according to an internal document obtained by Reuters.
Twitter’s last quarterly filing showed the company had swung to a net loss of about $400 million when excluding one-off disposal gains in the first six months of this year, down from a profit of $133 million in the previous year’s period.
One of the most overpaid deals ever
The move comes amid news that every second Twitter employee could lose their job in a mass culling on Friday, even as some staff took to sleeping in the office to meet the new owner’s accelerated timetables for new projects. Twitter is now facing a class action lawsuit in San Francisco federal court for failing to observe the 60-day notification period.
Corporate consultants typically advise enacting the most painful measures during a restructuring at the very outset. This removes all the deadwood in one fell swoop so the remaining staff can look forward and focus on returning to profitable growth.
The cuts are, however, radical and as the lawsuit suggests, possibly even illegal. Yet they may be necessary if Musk wants to at least recoup the $44 billion he sunk into the company along with an elite group of coinvestors banking on his business acumen.
Wedbush Securities tech analyst and Tesla bull Dan Ives predicted Musk’s Twitter deal “will go down as one of the most overpaid tech acquisitions in the history of M&A deals.”
Unfortunately for the company, the Tesla CEO’s abrasive style may push Twitter customers away. Consumer branded goods companies like General Mills and Mondelēz as well as drugmaker Pfizer, along with several carmakers that compete with Musk’s Tesla, have all reportedly suspended their advertisements fearing a return of hate speech.
Conservatives are demanding the end of suspensions for accounts held by those ranging from far-right politicians like Laura Loomer, to conspiracy theorists including Sandy Hook false flag accuser Alex Jones, to election deniers like My Pillow CEO Mike Lindell. And of course in the background is the promise Musk will reinstate Twitter privileges for ex-President Donald Trump, banned for inciting the violent Jan. 6 riots at the Capitol.
Moreover Musk has already warned celebrities like author Stephen King and Rep. Alexandria Ocasio-Cortez they must pay to retain their verified status in order to end what he called a “lords and peasants” class system on the app. When resistance ensued, he first cut the price from a reported $20 to $8 before mocking and belittling the feelings of his customers.
This is all happening because Musk made his incredibly generous $44 billion bid in April just as the Ukraine war sparked soaring energy prices that risk plunging the global economy into recession (Musk has recently been pushing Kyiv to accept a cease-fire on terms friendly to Russian President Vladimir Putin).
Musk had originally sought to terminate the Twitter deal, accusing the company of cooking the books and demanding an investigation by the Securities and Exchange Commission in an attempt to escape without paying.
Twitter sued in Delaware court for the entrepreneur to honor their contract and were expected to win last month after Judge Kathaleen McCormick gave him until Oct. 28 to consummate the deal. On Oct. 27 the purchase became legally effective.