Disney (NYSE:DIS) stock is in focus on news that the company has started to enact job cuts. These layoffs were previously announced in the context of the conglomerate’s overall turnaround plan.
Disney will lay off employees this week, CEO Bob Iger announced in a memo to the firm’s employees. The conglomerate will dismiss more of its employees next month. Then, it will carry out a third round of job cuts “before the beginning of the summer.” Cumulatively, DIS plans to reduce its workforce by about 7,000 positions, or 4% of its total employees.
The layoffs are expected to save the company $5.5 billion. Furthermore, they will even affect the company’s crown jewel, the sports network ESPN.
Among the executives reportedly let go this week were the “head of production and postproduction” at Hulu, a streaming channel controlled by Disney, and the “head of Disney’s acquisitions department,” according to Hollywood Reporter. A number of other employees in the acquisitions department were also dismissed, the website stated.
Disney Layoffs Set the Stage for Turnaround Plan
In addition to the layoffs, Iger, Disney’s CEO, decided to place the conglomerate’s content creation and streaming unit in the same division. Iger has also stated that the company’s streaming giant, Disney+, would produce less content.
For a few years, I’ve warned that Disney is in trouble because many consumers are giving up their cable subscriptions. And the company historically made a majority of its profits from per-viewer payments that it received from cable companies. Meanwhile, attendance at movie theaters, where the company also made a great deal of money, has been trending downward, and its streaming ventures were losing significant amounts of money.
Given this dynamic, it’s not surprising that the company’s operating income last year came in at $6.8 billion, versus the $14.84 billion it generated back in 2018. Meanwhile, DIS stock is nearly 40% below its November 2019 level.
Investors should try to determine if Iger’s changes can stem the company’s negative catalysts by, for example, finding ways to meaningfully boost the top and bottom lines of its cable networks and its streaming channels.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.