Iger shows his cards
Since returning to Disney in November, Bob Iger has inspired hope among employees and investors that he could turn around the entertainment giant — and faced a tough challenge from the activist investor Nelson Peltz.
On Wednesday, Mr. Iger began to lay out how he plans to fix Disney and fend off Mr. Peltz, with a sweeping round of layoffs and cost cuts, and earnings that beat Wall Street expectations. The question he now faces is whether that’s enough.
Mr. Iger is shrinking, and reorganizing, the House of Mouse. Disney plans to lay off 7,000 people, 4 percent of its work force, and cut $5.5 billion in costs. Just as significantly, Iger announced a corporate restructuring that would put content production and streaming under one roof. (That undoes a reorganization led by Bob Chapek, Mr. Iger’s ousted successor/predecessor.)
Also notably, the sports broadcaster ESPN and its streaming offshoot were hived off into their own business unit — though Iger said the move wasn’t meant to prepare for a sale or spinoff, as some investors have sometimes called for.
Disney still faces plenty of challenges. While its streaming operations, a major source of red ink, clamped down on losses in the most recent quarter, Mr. Iger is still under pressure to get them to profitability. (They’ve lost nearly $10 billion since Disney+ debuted in 2019.) Iger said the company — like other streaming platforms — would make fewer shows and concentrate on core franchises like Star Wars and Marvel.
Is all this enough to satisfy Mr. Peltz? The veteran activist investor, who’s seeking a board seat, has pushed the company to revamp its streaming business, cut costs, restore its dividend and formulate a solid C.E.O. succession plan — most of which Mr. Iger appeared to address on Wednesday.
After Wednesday’s results, a representative for Mr. Peltz told The Times, “We are pleased that Disney is listening.”
Other Disney investors appeared heartened by Wednesday’s results: The company’s shares rose more than 6 percent in after-market trading. But the entertainment titan’s stock remains down 40 percent since its peak in 2021, suggesting Iger has more to do.
In other Disney news, Gov. Ron DeSantis of Florida needled the company over his state’s plan to take control of the special tax zone that surrounds Disney World. “There’s a new sheriff in town,” he said at a news conference on Wednesday.
HERE’S WHAT’S HAPPENING
Credit Suisse reports its biggest loss since the 2008 financial crisis. The Swiss bank, which hopes to revive itself through a breakup, lost 7.3 billion Swiss francs ($8 billion) last year and warned of another “substantial” loss for 2023.
Dan Loeb reportedly joins the activist swarm at Salesforce. His Third Point has taken a stake at the corporate software giant, according to The Wall Street Journal. That would make him the fifth big-name activist investor pushing for change there, alongside Elliott Management, Starboard Value, ValueAct Capital and Inclusive Capital.
Britain deals a blow to Microsoft’s $70 billion video game deal. The U.K. Competition and Markets Authority said that it believed the planned takeover of Activision Blizzard would hurt video game customers. It gave Microsoft only a few potential remedies, including selling the business associated with the popular “Call of Duty” franchise — or just calling off the deal.
A Twitter glitch temporarily freezes out users. For about two hours on Wednesday, users were told they were “over the daily limit for sending tweets” or found they couldn’t follow new accounts. The outage was eventually resolved, but Elon Musk reportedly told software engineers to focus on shoring up Twitter’s stability ahead of the Super Bowl, according to The Information.
Alphabet fumbles its first step in the chatbot race
The stakes for tech giants in the race to bring A.I. to consumer services like search are higher than ever, after ChatGPT captured the public imagination.
But efforts by Alphabet, Google’s parent company, to catch up with Microsoft hit a bump on Wednesday, after its new chatbot showed an error, leaving investors unimpressed with its flashy debut.
Shares in Alphabet tumbled more than 7 percent on Wednesday after the company showed off the capabilities of its Bard chatbot at an event in Paris. While Google executives emphasized that they already incorporate A.I. into search, they showed how Bard could help users plan trips or car purchases. And they also demonstrated new A.I.-enhanced tricks for Google Maps.
But Google was on its back foot, after Reuters reported that an ad for Bard put out earlier this week flubbed a question about deep space. Company representatives acknowledged the mistake, noting that Bard was still being refined.
The error showed why Alphabet is being conservative on A.I. Unlike Microsoft, whose Bing claims a sliver of the search market, Alphabet has a lot to lose if A.I.-powered consumer services like chatbots give wrong answers. (Or, as some researchers worry, disinformation.) While investors, and some employees, have urged Alphabet to push more A.I. products out the door, company leaders want to err on the side of caution.
That hasn’t stopped rivals from taking shots: Sam Altman, whose OpenAI created ChatGPT and is partnering with Microsoft, called Alphabet “a lethargic search monopoly” that was feeling the heat from competition. After all, Microsoft’s ChatGPT-powered Bing has gotten positive reviews, and more rivals are rushing to create chatbots and other services, with Alibaba the latest to do so.
But some on Wall Street think that Alphabet doesn’t need to rush — yet. “Whoever has the better product and strategy ultimately wins,” analysts at Truist wrote to investors on Wednesday. They added that they expect Alphabet’s years of investment in A.I. “should help maintain its dominance.”
New worries about the Adani empire
A fresh wave of bad news is shaking investor confidence in the holdings of the Indian industrialist Gautam Adani, whose fortune has been rocked by accusations that his conglomerate operates “the largest con in corporate history.”
Shares in Adani companies plunged again this morning, including an 11 percent drop by the flagship firm, Adani Enterprises, after several developments:
The Financial Times reported that the Adani Group’s repayment of a $1.1 billion loan had followed a margin call of over $500 million.
TotalEnergies, the French energy giant, said it would pause a planned $4 billion investment into a joint venture with Adani on green hydrogen, pending an audit. Total’s C.E.O., Patrick Pouyanné, told reporters that “it makes no sense” to proceed “until there is more clarity.”
The financial index provider MSCI said it was reviewing whether some of the Adani Group’s listed companies qualified as having free-floating stocks. If it shifts how it weights them in its indexes, that could force investment funds to dump some Adani holdings.
Adani’s tormentor has broken his silence. Nathan Anderson of Hindenburg Research, whose Jan. 24 report alleging wrongdoing by the Adani Group set off a cascade of crises for the conglomerate, tweeted that MSCI’s move was “validation of our findings on offshore stock parking.” (Among Hindenburg’s claims was that Adani had used a maze of offshore shell companies to inflate the stock prices of its publicly traded companies; Adani Group has called the accusations baseless.)
“Industry is kind of united: We don’t want this.”
— Antonia Tzinova, a partner at the law firm Holland & Knight, on lawmakers’ efforts to restrict a wide range of investments in China. The Biden administration is seeking new rules that would target the financing of strategic industries like quantum computing.
Value in the virtual world
The French luxury house Hermès has won a landmark case against someone selling digital versions of its Birkin bag, in a ruling that could have big consequences for how brands enforce their rights in the online world.
The ruling treats tokens from an artist’s crypto project as more like commodities than artworks. The artist Mason Rothschild said his “MetaBirkins,” NFTs associated with pictures he posted online of fur-clad versions of the bags, were a commentary on animal cruelty and protected as an expression of free speech. (NFTs are cryptocurrency tokens that can be used to establish ownership on the blockchain.) But Hermès argued that Mr. Rothschild’s project diluted its brand and could mislead consumers, and said it was working on its own NFTs.
A jury in New York federal court ruled that Mr. Rothschild’s NFTs were digital copycats and not protected under the First Amendment, and ordered him to pay more than $130,000 in damages.
Companies are pushing to assert themselves. Courts are seeing more cases that originate in the digital sphere — Nike, for example, is suing the online marketplace StockX over NFTs it says abuse its “swoosh” logo.
“A lot of brands are entering the metaverse and indicating an intent to sell in the virtual world so reasonable people could be confused and think MetaBirkins came from the brand,” said Lisa Ramsey, a trademark expert at the University of San Diego law school. She added that the verdict, which was also based on how Mr. Rothschild promoted the product, could lead to more litigation. “Now that we have a finding, maybe more brands will sue.”
Is this art vs commerce? Rothschild and his legal team slammed the ruling, saying it was a “great day for big brands” and a bad day for artists and free speech. Rebecca Tushnet, an intellectual property expert at Harvard Law School, who helped prepare the defense, suggested Mr. Rothschild could continue his legal fight. “We’re obviously disappointed and considering our options, given the importance to artists of freedom to comment on the world, including on big brands,” she told DealBook.
THE SPEED READ
CVS Health has reached a deal to buy Oak Street Health, which runs clinics focused on seniors, in an all-cash deal valued at $10.6 billion. (WSJ)
First Abu Dhabi Bank, with backing from the country’s sovereign investment fund, is reportedly looking to buy the Asia-focused British bank Standard Chartered for up to $35 billion. (Bloomberg)
Toshiba has a $15 billion buyout offer from a consortium of private equity investors. (FT)
The U.S. Labor Department found $30 billion more in wrongfully dispatched pandemic benefits, bringing the total to about $190 billion. (Politico)
Hyundai said it’s in talks with the Labor Department about child labor concerns involving its Alabama plant. (Reuters)
A bipartisan group of three U.S. senators demanded answers from the Chinese fast-fashion retailer Shein about whether it uses cotton tied to forced labor. (Bloomberg)
Best of the rest
“The prophet of urban doom” describes the damage that remote work could inflict on New York. Relatedly, the billionaire real estate developer Stephen Ross is betting that more wealthy New Yorkers will flock to Florida. (NYT, Bloomberg)
How FTX enticed celebrity endorsers like Tom Brady, Gisele Bündchen and Steph Curry to take its equity as part of their promotional deals. (FT)
Sales of Ivy Park, Beyoncé’s partnership with Adidas, have reportedly fallen far below expectations, losing money for the sportswear giant. (WSJ)
“Comedians Are Finding Lucrative Side Hustles — No Joke — as Babysitters.” (Bloomberg)
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