Bob Iger’s return to Disney creates strategic “uncertainty,” warns analyst

Disney (DIS) shares rose Monday on news that Bob Iger replaced Bob Chapek as CEO, effective immediately.

And the longtime CEO’s impact is already being felt upon his return.

On Monday, Iger made his first big move as CEO, firing Kareem Daniel and restructuring Disney’s Media and Entertainment Distribution (DMED) division. DMED was one of Chapek’s first big swings as CEO, but the retooling has been billed as a controversial move that has upset longtime veterans and reportedly “confused” workers.

“In the coming weeks, we will begin implementing organizational and operational changes across the company,” Iger wrote in an internal memo obtained by Yahoo Finance and sent to employees on Monday afternoon.

Iger added, “As you know, this is a time of tremendous change and challenges in our industry, and our work will also focus on creating a more efficient and cost-effective structure… Our goal is to have the new structure in place. in the coming months. Undoubtedly, elements of DMED will remain, but fundamentally I believe that storytelling is what fuels this company and is at the heart of how we organize our businesses.”

Kareem Daniel, president of Disney Media and Entertainment Distribution, attends the annual Allen and Co. Sun Valley Media Conference in Sun Valley, Idaho, U.S., July 6, 2022. REUTERS/Brendan McDermid

Wall Street analysts, at first glance, appeared optimistic that Iger’s return will improve the fortunes of a stock that lagged the market during Chapek’s bumpy tenure. But the decision still carries a number of risks.

“The transition creates some uncertainties that we all need to be aware of in terms of strategic changes,” RBC Capital Markets analyst Kutgun Maral told Yahoo Finance Live on Monday before news of Daniel’s departure broke.

“While the long-term opportunity remains very attractive, we still need to see what the next steps are to better assess the short- and medium-term implications for the shares depending on the path Iger takes for his ‘renewed growth’ mandate Maral said. , emphasizing the board’s decision suggests greater urgency in positioning the company for the next decade.

Maral referred to the company’s press release, which said Iger will serve as CEO for two years, with the Board’s mandate to “set the strategic direction for renewed growth and to work closely with the Board to develop a successor to lead the Company at the end of his term”.

“I think investors would like to see, over the next couple of years, more articulation and reshaping of [Disney’s] planning with the creative side of the business,” the analyst said, adding that pricing strategy and the evolution of its direct-to-consumer portfolio will also be top of mind.

However, Maral said, “the reality is, with Iger’s arrival, there’s only so much he could do operationally in the space of two years.

“The most important thing would be: What does it do to really change the strategic direction of the company? That’s what we’re excited to find out.”

HOLLYWOOD, CA - MARCH 04: (LR) The Walt Disney Company chairman and chief executive officer Bob Iger and Marvel Studios president and producer Kevin Feige attend the Los Angeles world premiere of Marvel Studios'

The Walt Disney Company president and chief executive officer Bob Iger and Marvel Studios president and producer Kevin Feige attend the Los Angeles world premiere of Marvel Studios’ ‘Captain Marvel’ at Dolby Theater on March 4, 2019 in Hollywood, California., (Photo by Alberto E. Rodriguez/Getty Images for Disney)

Chapek’s departure comes just months after Disney’s board voted unanimously in June to extend his contract for another three years, through 2025. At the time, the board noted that Chapek’s leadership was essential in helping the company navigate the headwinds of the pandemic.

However, his tenure has been full of controversy: political battles and problems with A-list talent, controversial reorganizations and the ever-looming shadow of Iger, who has spoken out against some of Chapek’s decisions.

Since Chapek took over as Disney CEO in late February 2020, Disney shares are down about 19%; the S&P 500 is up about 34% over the same period.

Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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