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Wall Street: DreamWorks Animation One Flop From Extinction

In the wake of yet another flop and hundreds of layoffs, DreamWorks Animation CEO Jeffrey Katzenberg announced a dramatic restructuring and refocus of his teetering company (and legacy). Seeking to reassure Wall Street, Katzenberg said DWA will reduce its annual output to two films instead of three, the films will cost less, and will be made with fewer people.

According to Deadline, Wall Street responded with a unified thumbs-down. In pre-market trading DWA stock is down almost 15% and analysts are clearly seeing what Katzenberg’s dramatic reshuffle attempted to cloud: The company is one flop away from extinction:

Cowen & Co, Doug Creutz: Downgrade to Underperform. DWA is in “a precarious financial position” with $500 million in debt, $50 million in cash, $110 million in cash costs for restructuring, and just one film — Home — teed up for 2015. Although it has $200 million available in credit, the company may have to pay $100 million next year to those who owned Awesomeness TV before DWA bought it in 2013. What’s more, “layoffs and management turnover are usually disruptive and morale-draining, and often damaging to a company’s culture.” The bottom line: the new firings risk “further worsening DWA’s competitive position in the very competitive animated film market.”

Four other analysts interviewed mostly agreed. Some said wait-and-see, others screamed Sell!, none suggesting buying when the stock is low.

Not to sound simplistic but Katzenberg needs to make better movies. Or do what almost all the rest of Hollywood did: Find a sugar daddy multinational to gobble DWA up into a corporation so large the write-downs come out of petty cash. 

John Nolte on Twitter @NolteNC             

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