“The culture at Roku was the same before I worked at Netflix,” Wood said in an interview. “Just similar philosophies.”
“Working at Roku is like being part of a professional sports team,” Wood wrote in a 2015 document that every employee receives. “We put extreme care into recruiting the best people; we pay well in a competitive market; encourage excellent teamwork, and expect everyone to perform at a high level.”
One former executive said every job at Roku is like being a “field goal kicker,” where employees are expected to accomplish specific, detailed goals. Some employees thrive under the pressure. If they can’t, they won’t be there long.
“We expect you to do a good job,” Wood said. “If you don’t do a good job, you’re going to get fired eventually.”
Wood and Netflix CEO Reed Hastings point to their cultures as a reason for their companies’ success. But both cultures can also lead to an environment of fear and confusion — though for different reasons.
At Netflix, as The Wall Street Journal explained in a 2018 story, employees formally review each other, giving blunt feedback to bosses and underlings alike. Workers “sunshine” errors, offering up public apologies and acknowledgments of failures.
In contrast, Roku doesn’t give any performance reviews at all. Wood has also made the unusual decision of paying employees based on a market rate rather than giving raises tied to internal performance. That’s irritated some younger employees who have expected a perfunctory raise every year at performance review time, said Wood.
“We have a lot of younger employees now, and they are very focused on getting raises,” Wood said. “You know, I’ve been here a year, I should get a raise. And, you might not get a raise. Or you might. It just depends on what we think the rate is for you. Sometimes they understand and adapt, sometimes they don’t understand, and they quit and then they post on Glassdoor. So, it’s a bit of a cultural mismatch.”
It can be difficult to figure out market rate, Wood acknowledged, especially because California and New York state laws prohibit asking employees how much they’re getting paid. But Roku can glean competitive salaries because it knows what it needs to pay to poach employees from other companies, Wood said.
Read the published culture documents from Roku and Netflix
Excelling in ambiguity
Annual reviews aren’t necessary because employees should be getting real-time feedback, Wood said.
“The work is hard, but it is also rewarding, and I am given a lot of autonomy,” said Taylor Yanez, a Roku engineer. “We don’t do annual reviews, which are a huge time suck.”
But while Yanez said he was given instant feedback by peers, seven former Roku employees who left in the last 18 months said they felt confused by Roku’s culture. They spoke with CNBC on condition of anonymity, either because they feared potential backlash or because contractual language in their severance packages forbids speaking about their firings.
“I literally don’t know why I was fired,” said one recently departed manager. “It’s the strangest place I’ve ever worked.”
Former employees said while they were assigned specific tasks, bosses evaluated them on different metrics because goals frequently changed as Roku grew. In addition to no performance reviews, Roku has very little hierarchy— almost all Roku engineers are called “senior software engineers,” regardless of tenure or role. Mix in a recent surge of new employees — Roku has increased headcount almost threefold, to more than 1,900 employees, since its 2017 IPO — and the result can be confusing.
Several ex-Roku employees said their bosses told them that working in ambiguous settings was part of the job. That runs counter to the Roku culture document, which claims, “Roku teams communicate clearly, in real time with each other and with other teams across the company. Plans, milestones, and strategic context are broadly known.”
“There’s no formal training,” said one mid-level executive, “At Roku, finding information is on you.”
Roku is trying to improve some of its organizational infrastructure as it grows, including formalizing an internship orientation for the first time this year, two of the people said.
“We compete to attract and retain the best talent anywhere and treat people like adults,” a Roku spokesperson said. “We provide onboarding and training for new and existing employees and seek those who are particularly resourceful, innovative, and self-sufficient. And we have a culture of real-time feedback, which has been remarkably successful.”
Netflix with a twist
Netflix and Roku offer unlimited vacation time, giving employees the right to dictate their own schedules as long as they can get their work done. Both have purposefully flat organizational structures, deemphasizing titles and hierarchy.
But unlike Netflix and other large technology companies, Roku offers few external employee perks, such as on-site day care, daily free catered lunches, inexpensive health plans or extensive personal wellness benefits. Roku doesn’t even match 401(k) contributions.
Instead, Wood has chosen to funnel that money into workers’ salaries, believing employees should be in charge of how they spend their money. Every past and present Roku employee who spoke with CNBC said the company compensated at or beyond their expectations. It pays a base salary and grants restricted stock units, though it doesn’t give bonuses.
Given the stock’s performance, it’s easy to see why employees have been eager to stick with the company. Roku shares have gained about 2,000% since the company’s IPO.
Roku’s senior leadership website page also illustrates a lack of diversity — including no women. That will change soon. Wood said Roku just announced a new head of human resources, Kamilah Mitchell-Thomas, previously Dow Jones’ chief people officer, who will replace current HR leader Troy Fenner. Roku’s board does have three women of nine members.
But Wood said diversity for diversity’s sake won’t dictate whom he hires.
“My focus is hiring the best people I can find,” Wood said.
Wood said he meets weekly with an executive coach, Dave Krall, who was Roku’s president and chief operating officer in 2010 and, before that, CEO of Avid Technology. He defines his leadership as hiring the right people and allowing them the freedom to do their job.
“The leadership a company needs changes as it grows,” Wood said. “When you’re 15 or 20 people, I’m the product leader at that point. As it gets bigger and you hire more senior people, you don’t have to do that anymore and they don’t want you to do that, because that’s their job. I used to do our product road map. I don’t do that anymore. These days, we have new initiatives. Pushing us into new business areas and expanding our businesses are where I’m hands-on today.”
Tech stocks just finished a five-week rally — the longest stretch since market peak in November 2021
Tech stocks on display at the Nasdaq.
Peter Kramer | CNBC
The Nasdaq just wrapped up its fifth straight week of gains, jumping 3.3% over the last five days. It’s the longest weekly winning streak for the tech-laden index since a stretch that ended in November 2021. Coming off its worst year since 2008, the Nasdaq is up 15% to start 2023.
The last time tech stocks enjoyed a rally this long, investors were gearing up for electric carmaker Rivian’s blockbuster IPO, the U.S. economy was closing out its strongest year for growth since 1984, and the Nasdaq was trading at a record.
This time around, there’s far less champagne popping. Cost cuts have replaced growth on Wall Street’s checklist, and tech executives are being celebrated for efficiency over innovation. The IPO market is dead. Layoffs are abundant.
Earnings reports were the story of the week, with results landing from many of the world’s most valuable tech companies. But the numbers, for the most part, weren’t good.
Apple missed estimates for the first time since 2016, Facebook parent Meta recorded a third straight quarter of declining revenue, Google‘s core advertising business shrank, and Amazon closed out its weakest year for growth in its 25-year history as a public company.
While investors had mixed reactions to the individual reports, all four stocks closed the week with solid gains, as did Microsoft, which reported earnings the prior week and issued lackluster guidance in projecting revenue growth this quarter of only about 3%.
Meta was the top performer among the group this week, with the stock soaring 23%, its third-best week ever. In its earnings report Wednesday, revenue came in slightly above estimates, even with sales down year over year, and the first-quarter forecast was roughly in line with expectations.
The key to the rally was CEO Mark Zuckerberg’s pronouncement in the earnings statement that 2023 would be the “Year of Efficiency” and his promise that “we’re focused on becoming a stronger and more nimble organization.”
“That was really the game-changer,” Stephanie Link, chief investment strategist at Hightower Advisors, said in an interview Friday with CNBC’s “Squawk Box.”
“The quarter itself was OK, but it was the cost-cutting that they finally got religion on, and that’s why I think Meta really took off,” she said.
Zuckerberg acknowledged that the times are changing. From the year of its IPO in 2012 through 2021, the company grew between 22% and 58% a year. But in 2022 revenue fell 1%, and analysts expect growth of only 5% in 2023, according to Refinitiv.
On the earnings call, Zuckerberg said he doesn’t expect declines to continue, “but I also don’t think it’s going to go back to the way it was before.” Meta announced in November the elimination of 11,000 jobs, or 13% of its workforce.
Link said the reason Meta’s stock got such a big bounce after earnings was because “expectations were so low and the valuation was so compelling.” The stock lost almost two-thirds of its value last year, far more than its mega-cap peers.
Apple, which slid 27% last year, gained 6.2% this week despite reporting its steepest drop in revenue in seven years. CEO Tim Cook said results were hurt by a strong dollar, production issues in China affecting the iPhone 14 Pro and iPhone 14 Pro Max, and the overall macroeconomic environment.
“Apple is navigating what is, of course, a very difficult environment quite well overall,” Dan Flax, an analyst at Neuberger Berman, told “Squawk Box” on Friday. “As we move through the coming months and quarters, we’ll see a return to growth and the market will begin to discount that. We continue to like the name even in the face of these macro challenges.”
Amazon CEO Andy Jassy, who succeeded Jeff Bezos in mid-2021, took the unusual step of joining the earnings call with analysts Thursday after his company issued a weaker-than-expected forecast for the first quarter. In January, Amazon began layoffs, which are expected to result in the loss of more than 18,000 jobs.
“Given this last quarter was the end of my first full year in this role and given some of the unusual parts in the economy and our business, I thought this might be a good one to join,” Jassy said on the call.
Managing expenses has become a big theme for Amazon, which expanded rapidly during the pandemic and subsequently admitted that it hired too many people during that period.
“We’re working really hard to streamline our costs,” Jassy said.
Alphabet is also in downsizing mode. The company announced last month that it’s slashing 12,000 jobs. Its revenue miss for the fourth quarter included disappointing sales at YouTube from a pullback in ad spending and weakness in the cloud division as businesses tighten their belts.
Ruth Porat, Alphabet’s finance chief, told CNBC’s Deirdre Bosa that the company is meaningfully slowing the pace of hiring in an effort to deliver long-term profitable growth.
Alphabet shares ended the week up 5.4% even after giving up some of their gains during Friday’s sell-off. The stock is now up 19% for the year.
Ruth Porat, Alphabet CFO, at the WEF in Davos, Switzerland on May 23rd, 2022.
Adam Galica | CNBC
Should the Nasdaq continue its upward trend and notch a sixth week of gains, it would match the longest rally since a stretch that ended in January 2020, just before the Covid pandemic hit the U.S.
Another area in tech that flourished this week was the semiconductor space. Similar to the consumer tech companies, there wasn’t much by way of growth to excite Wall Street.
AMD on Tuesday beat on sales and profit but guided analysts to a 10% year-over-year decline in revenue for the current quarter. Intel, AMD’s primary competitor, reported a disastrous quarter last week and projected a 40% decline in sales in the March quarter.
The semiconductor industry is dealing with a glut of extra parts at PC and server makers and falling prices for components such as memory and central processors. But after a miserable year in 2022, the stocks are rebounding on signs that an easing of Federal Reserve rate increases and lightening inflation numbers will give the companies a boost later this year.
Jury finds Musk, Tesla not liable in securities fraud trial following ‘funding secured’ tweets
Tesla CEO Elon Musk and his security detail depart the company’s local office in Washington, January 27, 2023.
Jonathan Ernst | Reuters
The Tesla, SpaceX and Twitter CEO was sued by Tesla shareholders over a series of tweets he wrote in August 2018 saying he had “funding secured” to take the automaker private for $420 per share, and that “investor support” for such a deal was “confirmed.”
Trading in Tesla was halted after his tweets, and its share price remained volatile for weeks.
Jurors deliberated for less than two hours before reading their verdict. “We are disappointed with the verdict and considering next steps,” said Nicholas Porritt, partner at Levi & Korsinsky, the firm representing the shareholders in the class action, in an email to CNBC.
“I am deeply appreciative of the jury’s unanimous finding,” Musk wrote on Twitter.
Musk’s lead counsel, Alex Spiro of Quinn Emanuel Urquhart & Sullivan, arguing before the jury earlier Friday, said the matter had to be assessed in context, noting the Tesla CEO was only considering taking the company private. He said fraud cannot be built on the back of a consideration.
Spiro did not immediately respond to requests for comment.
The shareholders in the certified class-action lawsuit included a mix of stock and options buyers who alleged that Musk’s tweets were reckless and false, and that relying on his statements to make decisions about when to buy or sell cost them significant amounts of money.
Musk later claimed that he had a verbal commitment from Saudi Arabia’s sovereign wealth fund, and that he thought funding would come through at his proposed price based on a handshake. However, the deal never materialized.
During the course of this trial, Musk also said he would have sold shares of SpaceX to finance a going-private deal for Tesla, as well as taking funds from the Saudi Public Investment Fund.
Apple’s long-term positives outweigh rare earnings miss, Morgan Stanley says
Apple CEO Tim Cook holds a new iPhone 14 Pro during an Apple special event on September 07, 2022 in Cupertino, California.
Justin Sullivan | Getty Images
“Taking a step back, it’s rare to see Apple miss and guide down in a quarter, but we believe the long-term positives from tonight’s report outweigh the short-term negatives,” Morgan Stanley’s Erik Woodring wrote. Apple’s Thursday night earnings report cited a strong dollar, continued production issues in China, and the broader macroeconomic environment as three reasons for Apple’s first year-over-year sales decline since 2019.
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“On the third factor, I would say was just the challenging macroeconomic environment, and you’re hearing that from, I would think, everybody,” CEO Tim Cook told CNBC’s Steve Kovach.
But Morgan Stanley assesses those headwinds as transitory, noting both accelerated growth in iPhone installed base and a continued upward margin trajectory as longer-term upside which will ensure “the Apple flywheel keeps spinning.”
Morgan Stanley reiterated its top pick rating for Apple. The company has managed to navigate a broader tech downturn with considerable success and is one of the few tech companies that has staved off layoffs and maintained a level of operational expense discipline.
It’s that same discipline that helps Morgan Stanley analysts maintain a bullish outlook on Apple, which guided to a March 2023 gross margin ranging from 43.5 to 44.5%, according to the note.
“We believe Apple’s ability to post the highest gross margin in a decade despite seeing revenue decline Y/Y is impressive, and moving forward, we expect gross margins to improve as mix, FX, commodities, and logistics all work in Apple’s favor through the rest of 2023 and into FY24,” Morgan Stanley’s note said.
Apple’s user spend levels are also keeping Morgan Stanley bullish, proof that “the underlying drivers of Apple’s model remain robust.”
Investors have apparently embraced Morgan Stanley’s appraisal of Apple’s durability as a long-term investment. Apple shares were up around 1% at the open Friday, despite the sales miss, recouping losses from a 4% drop Thursday night. The company also reported misses on the top and bottom lines, beating analyst expectations only in iPad and services revenue.
— CNBC’s Michael Bloom contributed to this report.
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