Walt Disney (DIS) Closes LucasArts Games, Plans Layoffs

Last week, The Walt Disney Company (DIS) announced that it would start laying off staff in its studio and consumer product divisions to streamline the company's operations. It also announced that it would shut down LucasArts games studio, which it acquired with its acquisition of LucasFilm. Although the move surprised some investors, these strategies reflect the company's firm commitment to reducing costs throughout the fiscal year.

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Ever since its major acquisitions of Marvel and Lucasfilm, Disney has been dedicated to downsizing its movie studio, which has had an inconsistent track record. Over the past decade, the studio created some big hits such as The Pirates of the Caribbean, it also flopped spectacularly with bombs such as Mars Needs Moms and John Carter. As a result, Disney is now sticking to safer releases, such as those from its Marvel and Pixar studios, as well as 3D re-releases of classic movies. According to an inside source at Disney, the company is planning to cut studio jobs from its marketing and home video units, and a segment of its consumer products division, which creates toys and other Disney products. Last year, Disney cut 200 jobs at its Disney Interactive video game segment, after the company's releases were met with lukewarm reviews and sales. Disney then shifted away from selling video games, a stalled out industry that has hurt market leaders Electronic Arts (EA) and Activision Blizzard (ATVI), to focus more on online and mobile games. After the shift, another 100 employees at the segment have been laid off. Therefore, it wasn't surprising that LucasArts, the 30-year old game division of LucasFilms, will be completely shut down as Disney integrates the "Star Wars" brand into its own internal operations. LucasArts is known for such hit titles as Monkey Island, Grim Fandango and Knights of the Old Republic. The elimination of LucasArts has caused concerns among Star Wars fans, who believe that the extended Star Wars universe that has grown under the LucasArts banner could be eliminated completely to make way for Disney's seventh installment of Star Wars. These two strategies - of eliminating redundant businesses by integrating newer acquisitions - fits cleanly into Disney's longer-term strategy of growing its network television business, which generates nearly half of the company's revenue through networks such as ESPN. Another third of its revenue comes from theme parks and resorts, which the company has expanded with its cruise lines and upcoming Disney resort in Shanghai. Shares of Disney have risen over 30% in the past twelve months, making it one of the Dow's top performers. Despite its strong performance, the stock still trades at 14.8 times forward earnings with a 5-year PEG ratio of 1.32, indicating that the stock could continue to rise throughout the rest of 2013. Disney also pays a quarterly dividend of $0.75 per share - a 1.30% yield at current prices. Other News About DIS Disney to Begin Layoffs in Studio, Consumer Products - Sources Disney drastically reduces its studio and consumer products segments. Is Disney About to Destroy the Star Wars Expanded UniverseA ltogether? Is Disney about to clean house to give its new Star Wars franchise a fresh start? Other Stocks in the News Will Amazon Become the 'Facebook of Books'? Why did Amazon acquire Goodreads? This Underdog is Just Another Dog Has AMD bitten off more than it can chew with Intel and Nvidia? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Apr 8, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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