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Walt Disney Company
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Disneys Shake-up Resets the Stage Disneys Shake-up Resets the Stage By Dan Gallagher Dow Jones Even Robert Iger can only do so much in six weeks. He did manage to make Nelson Peltz's job a little more difficult in that time, though -- with the help of all those grown-ups in mouse ears. Disney's fiscal first-quarter results reported Wednesday afternoon were the company's first since Mr. Iger's return to the corner office. That happened about halfway through the quarter, following a disastrous earnings report and historic stock selloff sealed the fate of his handpicked successor. The most recent results are also the first since activist Trian Fund Management launched a proxy challenge, seeking a board seat for a founding partner, Mr. Peltz. The December quarter results won't fully quiet the critics. The Disney+ streaming service lost 2.4 million subscribers -- nearly one million more than analysts had expected. That, along with further weakness in the company's cable-TV and advertising businesses, dragged revenue in Disney's Media and Entertainment segment about 4% below Wall Street's estimates. Offsetting that was a return to form for the company's theme park business, where revenue exceeded analysts forecasts by 7% and operating margins for the crucial domestic-parks segment hit 35% -- 20 percentage points better than the disappointing margins the company posted three months ago. But Mr. Iger has been plenty busy. During the company's conference call, he announced a company reorganization that undoes the last one less than three years ago, where previous CEO Bob Chapek tried to fully orient the company toward streaming. He also effectively pulled a controversial long-term target for streaming subscribers championed by Mr. Chapek, promising to focus the business on "enduring growth and profitability." The reorganization also includes a cost-cutting plan that involves 7,000 layoffs -- about 4% of Disney's last reported head count. Finally, Disney plans to restore the dividend that it suspended to preserve cash in the early days of the pandemic, though Chief Financial Officer Christine McCarthy warned that it would be a "small fraction" of the company's pre-Covid dividend at first. It plans to declare the dividend before the end of the calendar year. Disney's share price rose 5% following the results and call -- a notable move for a stock already up 22% since Mr. Iger's return. The company's challenges certainly aren't behind it. The streaming segment still lost more than $1 billion in the December quarter, and the company is sticking to its previous forecast of that segment not turning positive until the end of the next fiscal year. Meanwhile, Disney's larger linear network business continues to weaken amid a global slump in advertising and rise in cord-cutting. But those trends are hurting Disney's peers too, and they don't have lucrative theme parks and a collection of the top entertainment brands such as Marvel and Star Wars to fall back on. Mr. Iger is also moving away from a myopic focus on its own streaming platform, noting on the call that the company is considering "greater use of legacy distribution opportunities" to boost revenue. Mr. Peltz's case is premised on the idea of the Mouse House needing a shake-up. Investors might conclude that Mr. Iger is shaking the place just fine on his own. |
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