Are Cuts by Disney a Positive Development?

There are few times when widespread layoffs are viewed as a positive development for a company, but the latest round of cuts by Disney (NYSE:DIS) might mean just that. Reuters reported on Thursday that Disney is shedding jobs in both its studio and its consumer products divisions, as CEO Bob Iger eyes further profitability for his upward-trending company.

Will Disney find itself understaffed following any of the cuts? It is possible that the layoffs in the marketing and studio division could have an effect on overall performance, yet Disney’s acquisitions have made numerous positions redundant. For example, layoffs at LucasArts (a video game wing of the George Lucas company Disney purchased in 2012) were expected and considered a way of trimming expenses. The company-wide audit requested by Disney’s chief executive may lead to even more job trimming in the coming months.

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Money-saving resolutions are not always common for companies performing as well as Disney, yet most analysts consider the moves a step in the right direction. According to sources, nearly all of the layoffs from the consumer products division were a result of improved technology making older jobs obsolete. Disney’s 12-month progression for $41 to $57 backs up the sentiment that Iger’s reign as chief executive has been overwhelmingly positive…

Disney signaled a willingness to move forward last year by acknowledging the pending obsolescence of console home video games. The company’s move into online gaming was encouraging and further endorsed by its performance in the markets. Investors uneasy about company layoffs can consider the moves part of a quest to operate a highly efficient company rather than a sign of desperation.

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Disney’s studio operations, where some of the cuts took place, faced harder times in 2012 than expected, while operating income in its consumer products division grew 11 percent. Shares traded at $57.21 mid-day Friday, a negligible drop of 0.68 percent. Analysts expect continued strong performance from Disney as the company moves forward in mobile gaming and makes use of its control of the Star Wars brand. If there were ever an example of layoffs meaning a positive development for a company, Disney’s latest moves could be it.

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