Twitter's Dick Costolo stepping down as CEO

SAN FRANCISCO (AP) — Twitter CEO Dick Costolo is stepping down, after critics squawked about the social messaging company's disappointing financial performance — and its recent stock slide.

Co-founder and Chairman Jack Dorsey, who served as CEO during Twitter's early years, will temporarily take the reins while the San Francisco company looks for a permanent replacement.

Investors reacted positively to the move, driving Twitter shares up nearly 6 percent in late trading after the announcement Thursday afternoon. Both Dorsey and Costolo, however, expressed confidence in the company's direction and said the board isn't seeking major changes.

"I believe in the course the company is on and the management team's ability to fulfill that and execute on it," Dorsey said during a joint conference call with Costolo and Wall Street analysts.

Both men characterized Costolo's departure, effective July 1, as voluntary. The 51-year-old Costolo, who once worked as a stand-up comedian and also holds a degree in computer science, said he began talking with Twitter directors about leaving last year. Costolo had been CEO for five years and led the company through a successful stock market debut in 2013. He will not receive any severance package.

Analysts, however, said the change wasn't a complete surprise. The company had $1.4 billion in revenue last year, primarily from advertising. But Twitter hasn't reported a profit since it has been publicly traded, and its shares have been down almost a third since the company's last quarterly financial report in April, when it missed Wall Street revenue estimates.

At that time, the company also lowered its financial outlook. On Thursday, Dorsey said the company is making no further changes in its financial projections.

Twitter reported 301 million monthly users in the first quarter of this year, up 18 percent from a year earlier. Even so, it hasn't seen the kind of growth that its bigger rival Facebook has enjoyed.

Under Costolo, the company introduced new advertising products and user features, including Periscope, which allows users to post live streaming video. But if its fans are fiercely loyal, critics say newcomers still find it daunting to learn Twitter's quirky terminology and customs.

"The vast majority of people who signed up no longer use the service," said Nate Elliott, a social media analyst at Forrester Research. "They need to do a much better job at giving people a reason to come back every day and making marketers happy."

"There were lingering concerns among some investors around the leadership capabilities of Mr. Costolo," added stock analyst Colin Sebastian of RW Baird, in a note to clients after the announcement.

Costolo will remain on Twitter's board of directors. Dorsey said the company will consider internal and external candidates for his permanent replacement.

The 38-year-old Dorsey is also chairman of Twitter's board. According to a company filing, the board won't decide until later this year if he is to receive extra pay for taking on the CEO duties. Dorsey said he'll also continue to run Square, the payment processing startup he founded after a previous stint as Twitter's CEO ended in 2008.

Costolo tweeted about the change Thursday afternoon. Greeting Dorsey by his Twitter handle, Costolo wrote "Welcome back, @jack" and linked to the official Twitter announcement.

While Dorsey said a search committee will set criteria for selecting the next CEO, he added, "We're looking for someone who really uses and loves the product."