Musk turns Twitter's deficit into a profit

I have some sad news for Elon Musk's critics. He's already making money on Twitter.

Dumping all those woke people who banned President Donald John Trump, the Babylon Bee and Robert Stacy McCain has turned Twitter's losses into profits, according to free-speech (and other freedoms) advocate Charles Haywood, who blogs here.

Using publicly available data, Haywood figures Twitter went from 20% deficits to a 28% profit.

Before I get into that, CEOs back Musk's clearing of the deadwood at Twitter.

Chloe Berger wrote in Fortune, "His unsubtle approach has been criticized by HR managers for being unprofessional and for lacking compassion—one even called his actions 'weak, pathetic, and cruel.' Some suggested that he would have been better off laying off workers the way Mark Zuckerberg did at Meta a week later, who took personal responsibility. Preliminary data at the company shows that as many as 1,200 Twitter workers left in response to Musk’s ultimatum. One worker, Dmitry Borodaenko, a cancer survivor who was laid off due to his desire to work remotely, filed a class action lawsuit against Twitter."

What a genius. He figured out how to get 16% (one in six) of his staff to quit, which spared him the expense of firing them. The ones who left were the woke drags on the company.

Berger said he has a cheering section among CEOs.

She wrote, "The division between leaders supporting the way Musk is treating workers and leaders who are criticizing his ways are emblematic of the post-pandemic CEO culture split, in which companies are focusing less on an employee’s wants and needs as a recession looms."

The bottom line is the bottom line. Nothing personal, just business. Companies should not promote the ideology of the anti-American left.

Haywood looked at the bottom line -- and smiled.

He tweeted: "I will now examine Twitter’s past financials and predict the future from them. I conclude that criticism of Elon Musk  is bizarrely off base, because Musk has overnight changed Twitter’s net (profit) margin from negative 20% to approximately plus 28%, more than Apple or Google.

"I am using annualized percentages based on Twitter’s most recent quarterly filings, for the period ending 6/30/22. These documents are freely available at the SEC’s website.

"Annual revenue was about $4.4 billion. Annual expenses were slightly more, and fell into four major buckets: cost of revenue; R&D; sales and marketing; and general and administrative. Those are roughly 37%, 26%, 25%, and 12% of total major expenses, respectively.

"According to the company, cash expenses for cost of revenue are essentially infrastructure—hardware and third-party servers, with some employee costs, namely operations teams. Employee costs include those related to stock and option grants (i.e., non-cash expenses).

"R&D expenses, on the other hand, consist primarily of personnel-related costs. The same is explicitly true of sales and marketing and of general/administrative.

"In other words, the vast majority of 63% of Twitter’s expenses are personnel costs. If we assume primarily is 80%, and that 20% of cost of revenue is also personnel costs, 58% of Twitter’s total costs are personnel costs.

"When Musk took over, Twitter had 7,500 employees. Let’s guess 70% of those have left. Leaving aside pay differentials, that suggests that Twitter’s expenses have, likely permanently, dropped 41% overnight. That makes its new annualized projected profit $1.3 billion.

"This means Twitter’s net margin, going forward, is now about 28%. By way of comparison, Apple and Google both maintain net margins in the 22 to 25% range. In other words, Twitter is now more profitable than those companies.

"Your mileage may vary, and this is somewhat of a simplification. But it shows why Musk can win just by firing worthless losers. Yeah, sure, maybe leftist pressure will keep some advertisers away. I doubt it. When the next Current Thing arrives, they’ll be back.

"But when you change from a negative profit margin to a margin that’s the envy of the tech world, you have a lot of room to screw up.

"I also note that it is ignorant to say that Musk has loaded up the company with debt. The debt/equity ratio in the deal was roughly 0.3:1, when many deals are done at 1:3, or with NINE TIMES as much debt.

"Sure, he has to make debt payments. But this isn’t some kind of knife-edge scenario as the ignorant often paint it."

OK, now for the downside.

$1.3 billion is nothing, 

He and his mates have $44 billion tied up in Twitter. That means a return on investment of 3%.

I mean it is nice and all, but if you believe Musk is going to just have Twitter running like it did under Jack "Unabomber" Dorsey, then you have greatly underestimated Mister Musk. He owns Starlink, doesn't he? We shall see if he can bring Twitter to lands that censor Google and the rest. My guess is there is an appetite for freedom around the world. That should prove to be profitable.

Whatever his plan, Musk is not so petty as to censor someone for saying Rachel Levine is a man, baby.

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If you have read "Thank the Lord for the Pilgrims," I thank you.