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Disney (NYSE: DIS), a media company that competes with Time Warner (NYSE: TWX), News Corp. (NYSE: NWS), and General Electric's (NYSE: GE) NBC Universal, is famous for having several happy theme parks. The branding always centers on the "Disney magic." But there isn't any magic for employees who will be getting the boot.
According to news reports from last week, the theme-parks division will be streamlined, and buyout offers to 600 employees have been made. New attractions might be delayed. In addition, ABC made some cuts (200 jobs gone, in fact) and combined its studio and programming units. Also, ESPN instituted a hiring freeze.
What should shareholders make of these moves? Although oftentimes the spin on streamlining events such as these is that it gives management an opportunity to improve the efficiency of a business institution, I think these cuts, when combined with the fact that the Dow is at multi-year lows and that Disney' stock itself hit a fresh 52-week low last Friday, offer an increasingly bearish view on Disney's prospects. And I think CEO Bob Iger is going to have to come up with some creative initiatives to get the stock rolling again. The Disney difference, as he puts it, will not be enough to steer the company comfortably through the recession.
Don't get me wrong, it'll help, and Disney's intangible brand equity is valuable, but the consumer's resolve will only deteriorate further from here. Instead, what Iger needs to do now is leverage the company's potential for synergy more so than ever before. Ramping up advertising for the parks on all the company's platforms should be ordered immediately.
Yes, the company does a lot of that already, but hey, it needs to go further in my estimation. ABC, ABC Family, etc., all of the media assets need to be on the same page and must launch a cohesive blitz about the parks and resorts, one that would involve marketing campaigns and special programming. Basically, Iger must turn up the volume of Disney's message about its theme parks, and how they can take the consumer's mind off current troubles. Emphasize the fantasy, all that. Again, I know this is already being done, but as a Disney shareholder who has seen his position sink further into the red, I want more action.
Perhaps all this stuff is already on the drawing board; if it is, great. The real takeaway from the streamlining and the price action is that Disney's stock may soon be priced at an even cheaper level. So whether you're trading or investing, you may have the opportunity to buy the stock at a more attractive valuation.
Disclosure: I own Disney, GE; positions can change without notice.
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Reader Comments (Page 1 of 1)
2-23-2009 @ 1:53PM
Cast Member #1 said...
As a cast member / stock holder, I would advise that you not hesitate to buy big at the current low price. Disney is making big moves (film at 11, as they say) and as soon as these moves are put in place, the stock could easily jump well past the $20 per share range and even above its previous levels in the $30 range. Can't be more specific for right now.....but think in terms of new, tiered, multi-use resorts, distant from Orlando.