DreamWorks (DWA) to Shut Down Main Studio, Cuts 500 Jobs

Shares of DreamWorks Animation SKG Inc. (DWA) were trading down -3.07 or -14.41 percent to $18.24 per share in Friday's premarket, after the company announced after yesterday's close it would be shutting down its main studio, PDI DreamWorks and lay off 500 workers. DreamWorks Animation stock closed at $21.31, up +0.63 or +3.05 percent in Thursday's regular trading session.

Universal City, California based DreamWorks Animation is a film production company originally founded in 1994 by Steven Spielberg, David Geffen and Jeffrey Katzenberg.
The company, spun off of DreamWorks studio in 2004, focuses on the production and development of films, video games and television programming. DreamWorks Animation is responsible for ten films which have grossed over $100 million apiece. The company is best known for producing Shrek and Shrek II. The company's latest releases include Mr. Peabody and Sherman, which has grossed $273 million worldwide, and How to Train Your Dragon 2, grossing $611 million worldwide.

The company said in a written statement late yesterday it would lay off 500 workers across all of its locations and close one of its main studios, PDI DreamWorks in Redwood City, California. DreamWorks stated that it would be closing the studio immediately and begin holding private meetings with the workers it intends to keep, offering them the opportunity to relocate at their southern studio in Glendale, California.

Jeffrey Katzenberg, CEO of DreamWorks Animation said in a letter to investors, "The number one priority for DreamWorks Animation's core film business is to deliver consistent creative and financial success, he continued saying, "I am confident that this strategic plan will deliver great films, better box office results, and growing profitability across our complementary businesses.

DreamWorks has recently had a number of disappointments at the box office and plans to implement a major restructuring of the company, which will include reducing the number of feature films it produces from three a year to two. The company was in talks with two companies to be taken over last year, Hasbro HAS and Japanese media company, SoftBank; however neither company went through with the purchase.

The company will now focus on the production of a sequel and an original title for 2016, 2017 and 2018. The six specific movies DreamWorks is set to produce will be: "Kung Fu Panda 3 to be released on March 18th, 2016, "Trolls on November 4th, 2016, "Boss Baby January 13th, 2017, "The Croods 2 December 22nd, 2017, "Larrikins February 16th, 2018 and "How to Train Your Dragon 3 on June 29th, 2018.

DreamWorks stock will open under its 52-week low of $19.20 per share this morning as investors bail on the stock. The stock was trading higher yesterday after the announcement, but is selling off sharply this morning due in part to pessimism traders have for the company's restructuring plan. Nevertheless, Piper Jaffray has upgraded its outlook on the stock to Overweight and has given the stock a $26 price target.

Other News About DreamWorks
Disney, Sony, DreamWorks seek to throw out anti-poaching lawsuit
Companies were accused of conspiring not to poach each other's animators to keep wages down.
Can these two new execs help DreamWorks Animation get its groove back?
Company has named Bonnie Arnold and Mireille Soria as co-presidents.

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Published on Jan 23, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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