When Bob Iger returns to lead Walt Disney, he must demonstrate a new side to Wall Street by reducing expenses and regaining profits in just two years after blowing money on acquisitions and a streaming business the previous time around.
The media conglomerate stunned investors late on Sunday night when it announced that Chief Executive Bob Chapek had been fired and that 71-year-old Iger had been given a two-year contract to lead the company back to growth.
The action brought to mind past return engagements, including Steve Jobs’ return to Apple and Howard Schultz’s crisis comeback to
“Iger’s comeback could have seemed like a brave decision. The company, however, is at a distinct stage of growth “The limiting of some operations may be one of the short-term solutions, according to PP Foresight analyst Paolo Pescatore.
The streaming service Disney+, which Iger assisted with the introduction of in 2019, could be the most direct target of that. In the most recent reported quarter, losses at the unit more than doubled to $1.5 billion (nearly Rs. 1,220 crores).
As Disney invests extensively in programming to entice customers, the business has started to weigh down profitability, straining investor tolerance and causing a 40% decline in its shares so far this year.
The action brought to mind past return engagements, including Steve Jobs’ return to Apple and Howard Schultz’s crisis comeback to Starbucks.
Disney+ will likely perform better with fewer end-state customers made up of super fans prepared to pay high RPUs, according to MoffettNathanson analysts. These subscribers would also produce significantly greater margins.
As the network loses cable customers, they also mentioned ESPN as a potential target for significant cost reductions, including a review of all incoming sports licences.
When it acquired a stake in ESPN in August, activist investor Dan Loeb’s Third Point promoted a prospective spin-off of the firm as well, though it later abandoned the notion.
Some brokerages have also expressed doubt about whether Iger’s two-year commitment would be sufficient to change the company and identify a replacement.
“The issue is that Iger cannot continue working forever. In 2016, he mishandled the switch to Tom Staggs, and now, with (Bob) Chapek, “stated Rosenblatt Securities.
Nevertheless, Disney shares were 10% higher in premarket trade on Monday, demonstrating support for the leader who oversaw the business for 15 years.