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Didn't Zynga report the same savings prior to collapsing? Is reporting massive savings on an infrastructure project a signal of softening demand and a weak pro

• late2part 9y ago
  Wot Mate? You think when a company announces they are saving money on costs, lowering COGS and increasing margin by cutting costs by investing in a lower cost, higher performance solution, it's a signal of softening demand and weak product pipeline? There's a kernel of truth in what you're saying, perhaps. Any growing company has to choose between devoting resources (engineers, cash, executive overhead) between different projects. Alot of the time companies expand by capturing market share through adding features and expanding their TAM. But it's foolish to suggest that lowering COGS and increasing margin means a company is in trouble. Let's say your company is now making $1B/year (Dropbox) and you can choose between adding 3% more revenue or lowering your costs by 7%. In most cases, for your IPO, you'll get a higher aggregate shareholder value by cutting the costs and increasing your margin.
  • greenyoda 9y ago
    Also, once a company is no longer being funded by venture capital and has to finance its own growth out of its profits, those millions it saves by cutting infrastructure costs can be used to hire more staff, rent more office space, and all the other things required for growth.