Netflix Eyes Layoffs as Stock Plummets Amid Warner Bros. Takeover Failure
The streaming giant is reportedly planning to cut approximately 5% of its workforce following a significant stock decline and the abandonment of its bid for Warner Bros. Studio.
Netflix is preparing to lay off approximately 800 of its 17,000 employees, according to reports citing sources familiar with the matter. This move follows a sharp decline in the company's share price, which has fallen more than 40% since December.
Co-CEOs Ted Sarandos and Greg Peters had reportedly pursued a takeover of Warner Bros. Studio, but their plans were abandoned in February after Paramount made a higher offer of $111 billion. Netflix had previously expressed interest in acquiring the studio and Warner's streaming service, HBO Max. The streaming company reportedly received $2.8 billion for its involvement in the bidding process, according to a Warner Bros. Discovery securities filing.
Analysts have expressed concerns about Netflix's performance. HSBC analyst Mohammed Khallouf downgraded Netflix shares from 'Buy' to 'Hold', citing the growing success of platforms like YouTube in reaching audiences. Khallouf also lowered his price target for the company's stock. Wells Fargo analyst Steve Cahall similarly lowered his rating to 'underweight', estimating an 8% decrease in member viewing hours compared to the previous year. Cahall noted a lack of major original series as a contributing factor to the stock's struggles, stating that breakout hits are essential for renewed growth.
As of the latest reports, Netflix shares are trading around $70, marking a significant drop of 42% year-to-date and 30% over the past six months. The company's market capitalization has fallen from approximately $400 billion to under $300 billion.
Netflix co-CEO Ted Sarandos acknowledged the company's growth challenges at a recent conference, stating, "Overall, we’re not growing as fast as I want us to, and we’re working on making that move faster." Despite this, he also asserted that "The business is great and growing fine."
Regarding the failed Warner Bros. bid, Sarandos defended the decision-making process, indicating that Netflix had priced its potential offer appropriately to ensure shareholder value. He stated that any higher price would have negatively impacted returns, even with Netflix's scale. The potential merger of HBO Max with Paramount Plus was also revealed earlier this week.
The reported layoffs are expected to be part of a broader restructuring that could be announced as soon as next week.