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Walt Disney Looking For Cost Savings, Layoffs An Option

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The Walt Disney Company (NYSE:DIS) commenced an internal cost savings review several weeks ago, Reuters reports. According to three undisclosed sources familiar with the seemingly clandestine operation, the cost savings review may include layoffs. Disney, which surprisingly reported impressive earnings in November, is looking to tighten up on jobs because of the advancements in technology, one of the sources revealed.

The same person also remarked that the company, synonymous with TV, film, theme parks, and merchandise excessive operations, could  stamp out redundant operations following a chain of notable acquisition over the past years. Indeed, these reports on cost savings, albeit unofficial, are consistent with remarks from its executives in November last year. These executive had warned that the inflated costs of sport rights, coupled with next to stagnant home video sales, would slacken growth. Disney spokeswoman Zenia Mucha shared some insight that incidentally coincided with what the sources said.  “We are constantly looking at eliminating redundancies and creating greater efficiencies, especially with the rapid rise in new technology,” she remarked.

While the sources noted that the management was pondering on layoffs, they maintained that staff cuts were not yet certain at the moment. Notwithstanding, Disney’s track record of streamlining operations through layoffs, bundled with the company’s past consistency with the whole idea suggests that the layoffs could happen.

Disney, which made front page news after inking a deal with Netflix, Inc. (NASDAQ:NFLX) at the beginning of December last year, will probably implement the cost savings in Disney Studios. Of all the conglomerate’s four principal product divisions, Disney Studios has the most deplorable margins. In addition, The Walt Disney Company (NYSE:DIS)’s financial filings reveal that its interactive unit, which creates online games, lost $758 million over the past three years. The interactive unit has in the past shed off a reasonable number of workers with an estimated 200 people losing jobs in 2011 and another 50 in September last year.

Tony Wible, a Janney Montgomery Scott analyst with a neutral rating on the stock, is inclined to believe that the company could tighten up on jobs in the music, interactive and studio units. Michael Morris, a Davenport and Company analyst with a buy recommendation on The Walt Disney Company (NYSE:DIS), believes that the whole idea of cost savings is not an entirely negative thing. “It speaks to a fiscally responsible management,” he remarks.


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