Shares of Paramount (NASDAQ:PARA) experienced a significant dip, falling 4.1% in afternoon trading. This decline follows reports that the recently merged Paramount and Skydance are preparing for substantial layoffs, impacting thousands of employees.
Massive Layoffs Expected at Paramount
Sources indicate that the Skydance-led Paramount is planning to cut between 2,000 and 3,000 positions around November. This move is part of a broader cost-cutting initiative aimed at achieving $2 billion in efficiencies following the recent $8.4 billion merger. While the layoffs will affect the entire company, CBS News and local stations are reportedly bracing for a particularly significant impact.
Why the Layoffs?
Paramount's recent financial performance has been challenging, with revenue declining 2% annually over the past two years and earnings per share also falling. President Jeff Shell described the upcoming layoffs as a necessary, one-time event to stabilize the company's future, emphasizing the desire to avoid recurring layoffs.
Market Reaction and Investment Outlook
Paramount's shares are generally not highly volatile, with only nine moves exceeding 5% in the past year. Today's decline suggests the market views the layoff news as meaningful, even if it doesn't fundamentally alter the overall perception of the business.
Just 20 days ago, the stock dropped 6.5% following Needham's advice to investors to “move to the sidelines” due to uncertainty surrounding the Skydance Media merger. Needham has reiterated its “Hold” rating, citing a lack of clarity on the company's ownership and leadership structure post-merger. The market's reaction underscores the anxieties surrounding the transition and the future direction of the media giant.
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