Disney’s new earnings report gives investors what it wants to do

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Disney’s new earnings report gives investors what it wants to do

In Bob Iger's first earnings report since his recent return to Walt Disney Co. DIS, he gave Wall Street exactly what it wanted: layoffs, corporate restructuring and a move to reinstate the entertainment giant's dividend.

Iger's return in November was heralded by many Wall Street, who are hoping he will mirror Steve Jobs's triumphant return to Apple Computer in 1997. The company has already been targeted by an activist investor, Nelson Peltz of Trian Partners, who wants a seat on the board and has argued that Disney needs better cost discipline, that it doesn't use its theme parks business to fund its streaming business, and needs to restore its dividend.

Peltz got some of what he wanted Wednesday, with Iger announcing 7,000 layoffs, a restructuring that creates three core segments and a plan that will cut costs in the non-content part of the business by $5.5 billion. Iger said that while he is recommending to the board to restore the dividends, it will be modest. He said that we hope to build upon it over time.

He said Disney's cost-cutting initiatives will make it possible to pay for the dividend, a strategy Intel Corp. INTC is using to keep paying its dividend, as well as Meta Platforms Inc. META, for its massive stock buyback.

Intel and Meta are shipping proceeds from layoffs straight to Wall Street.

So far investors seem to be pleased with Iger's big news, sending Disney's shares up at one point more than 10% in after-hours trading on Wednesday, in hopes that he is restoring the magic. Shares were up 5.4% during the extended session. The company doesn't want to have Peltz join the board, as it advised shareholders in its most recent proxy filing last week not to vote for any representatives of the Trian Group on the company's board.

I think we might have gotten a bit too aggressive in terms of our promotion, and we're going to take a look at that. I listed a number of things on the call. That is one of them. He talked about pricing as well.

Peltz has some solid points in his analysis of Disney's current issues. The streaming business, a unit it refers to as the direct-to- consumer in its earnings release, reported a whopping operating loss of $1 billion, while Disney's theme parks had an operating profit of $3.05 billion. Now that some of his demands have been met, Disney is hoping that Peltz and Co. will go away. Iger can continue to hope, even though that seems unlikely. It's up to the shareholders to decide if Peltz gets on the company's board. If he does, Iger may regret his return to the Magic Kingdom.