The job cuts will save the entertainment company $350 million to $400 million in annual operating expenses, according to a company spokeswoman. Disney said it hopes to complete the reduction by the end of July, primarily through voluntary resignations. After the period, the company expects to have 116,000 employees.
The layoffs come shortly after Disney eliminated 400 positions from its Go.com Web portal. In a memo to employees Tuesday, which was also forwarded to Wall Street analysts, Disney said the latest round of cuts would affect most areas in the company, including its corporate staff, but did not specify any departments.
"We have been working equally hard to make sure we are operating in the most efficient way possible by cutting our costs in almost every area," the memo read. "But despite our progress, the economy has become more challenging in recent months, and we must continue to seek ways to manage our businesses even more productively.
"This may be the most difficult series of decisions that the company has made in the last 20 years."
Job cuts are not common at the entertainment giant. Company spokeswoman Chris Castro said the company has never had a reduction "of this size."
"The growth of the company has plateaued," said Jordan Rohan, an equity analyst at Wit SoundView. "In order to enhance the bottom line, companies like Disney, AOL Time Warner, and possibly Viacom have had to reduce head count."
Rohan added, however, that the job cuts are a positive step and that he will likely raise his financial estimates for the company.
As part of the cuts, Disney says it will incur a one-time charge of less than $250 million. The charges will not affect previously stated financial forecasts, according to Castro.
Disney has said that it expects earnings per share growth in 2001, before one-time charges, but will not meet previously anticipated double-digit growth. The company also says it expects to deliver cash flow for 2002 at an excess of $2 billion after taxes and investments.
The company also does not expect changes as a result of the charges to its long-term compounded EBITDA (earnings before interest, taxes, depreciation and amortization) growth, which it estimates at an average of 13 percent to 15 percent beyond 2001.