Disney Considering Layoffs to Cut Costs

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Walt Disney Studios

Layoffs at the Walt Disney Company’s studios and other units may take place in the wake of an internal cost-cutting review begun by the Mouse House several weeks ago, according to “three people with knowledge of the effort.”

Due to improved technology, Disney is pondering cutbacks in jobs that it no longer needs, one of the three told Reuters. It’s also examining redundant aspects of its empire that could be eighty-sixed after several major acquisitions over the past several years, the person added.

Although Disney has used layoffs to smooth operations, staff cuts are not certain at this point, the source added. The company is considering a hiring freeze instead of layoffs, a second source said.

The sources requested anonymity because Disney has not acknowledged the review publicly.

Disney’s studio division is the least profitable of the entertainment giant’s four major product divisions, having had a profit margin of 12.3% last year. Cuts will most likely take place at the studio division, two of the three sources said.

The company has changed its business practices to make fewer films and depend more on such outside studios as Steven Spielberg’s DreamWorks. The studio finances its own films, and paying Disney a marketing and distribution fee.

Tony Wible, an analyst with Janney Montgomery Scott, suggested that Disney may cut jobs at the studio and interactive divisions, along with its music arm. His company has a neutral rating on Disney stock.

“This is not necessarily a negative thing,” Michael Morris, an analyst with Davenport and Co., said of the possible layoffs. “It speaks to a fiscally responsible management.”

Though Morris was unaware of the review, he has a buy recommendation on the stock.

Disney shares dropped Monday by 2.3% to close at $50.97.

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