Investors Are Thrilled That Twitter CEO Dick Costolo Is Stepping Down

By Markets Fool.com

The writing has been on the wall for Twitter's Dick Costolo for quite some time, and he is now officially stepping down as CEO. Following an overhyped IPO in 2013 and initial stock run-up, Twitter has delivered a string of disappointing financial results that failed to meet lofty investor expectations. Indeed, it's been quite the roller-coaster ride for shareholders.

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Shares popped as much as 10% in after hours trading once the news was announced. So, yeah, you could say that investors are thrilled.

Jack is back
Twitter's co-founder Jack Dorsey is coming back as interim CEO, effective July 1, as the company searches for a permanent replacement for Costolo. Dorsey was Twitter's first CEO during its early private days. Another co-founder, Evan Williams, took the CEO title in 2008, and Costolo become CEO in 2010. Costolo had previously been Twitter's chief operating officer, and he will remain on the board of directors (while his equity grants continue to vest).

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Source: Twitter.

Under Costolo's leadership, Twitter has attempted to break out of its niche position within social networking. Costolo also shook up Twitter's management team several times last year, and then started the dreaded succession conversation with the board about six months ago. The company just recently hit over 300 million monthly active users, far less than larger rival Facebook and its 1.44 billion. The company also hasn't come up with innovative new advertising products to reinvigorate the business.

Twitter's MAU growth has stagnated, particularly in the important U.S. market where it has the strongest monetization.

Of course, Dorsey has been busy as CEO of Square, the booming mobile payments start-up, so he'll have his hands full. Both companies' headquarters are located within the same office building, so it's not like Dorsey will have much commuting to do.

How quickly things change
Interestingly enough, just two weeks ago Re/code's Kara Swisher asked Costolo point blank whether he would still have his job by the end of the year. Costolo responded by affirming that he was "totally in sync" with the board about the company's overall strategy and execution. The "total audience" strategy hopes to engage with the roughly 300 million logged-in users who visit the site every month, the 500 million visitors who are not logging in, and another 700 million viewers who see syndicated tweets.

While Costolo's words were reasonably confident, he was visibly flustered by the question. But how can you not react defensively when put on the spot with a question like that? Costolo's resignation comes just days after early investor Chris Sacca penned a rather long missive on "What Twitter Can Be." Sacca still sees significant potential, but acknowledged many of the company's shortcomings.

Dorsey's short-term return makes some sense because he was previously CEO, but perhaps Twitter needs an outside perspective to come up with better ideas in the long term.

The article Investors Are Thrilled That Twitter CEO Dick Costolo Is Stepping Down originally appeared on Fool.com.

Evan Niu, CFA owns shares of Apple and Facebook. The Motley Fool recommends Apple, Facebook, and Twitter. The Motley Fool owns shares of Apple, Facebook, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.