Filmmaker DreamWorks sinks after detailing job, movie cuts in plan to improve profitability

MarketsAssociated Press

Shares of DreamWorks Animation tanked Friday after the filmmaker said it would cut 18 percent of its workforce and pare the number of films it produces each year.

DreamWorks is responsible for huge hits like "Shrek" and "Madagascar," but more recent films such as "Turbo" and "How to Train Your Dragon 2" have not done as well as anticipated. Another film, "Mr. Peabody & Sherman," contributed to a loss in its most recent quarter.

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CEO Jeffrey Katzenberg said that the company's film plans had grown too ambitious and led to inconsistent performance.

The Glendale, California, company said Thursday after the markets closed that it would reduce its film count from three to two and cut 500 jobs.

DreamWorks now plans to focus on one original film and one sequel each year.

The filmmaker will take a $290 million pre-tax charge in connection with the restructuring. It expects to save $30 million in 2015, growing to roughly $60 million by 2017.

The restructuring introduces another layer of uncertainty for investors, said Janney Capital Markets analyst Tony Wible, who lowered his rating on the stock to "neutral" from "sell."

Wible said in a research note that investors see higher risk and little growth from the company's core film division until 2017. He added that non-cash impairment charges that DreamWorks has taken for four of its last six films "undermines confidence in its ability to convert the massive film inventory into cash."

Shares of DreamWorks Animation SKG Inc. plunged more than 13 percent, or $2.84, to $18.47 Friday before markets opened. The stock had already dropped 37 percent last year.