Robert Iger May Not Be as Successful the Second Time Around at Disney

Robert Iger has just received a $12 billion vote of confidence. He will need all of this support as he continues his work.

Disney's stock price is 5.61%.

The market value of the company jumped on the news that Mr. Iger is returning to the role of chief executive officer. In a statement, the company’s board said he will take back the CEO role for two years “to set the strategic direction for renewed growth and to work closely with the Board in developing a successor to lead the Company at the completion of his term.” Bob Chapek, Mr. Iger’s handpicked successor, was escorted from the stage without a quote in the press release.

After Disney's disastrous fiscal fourth-quarter results earlier this month, the company's market value took a hit, leading to the company's rough send-off. While Disney+ added more subscribers than expected, the segment also generated a much larger operating loss than anticipated. Revenue and earnings from the company's theme-park division also fell short of estimates, resulting in a rare miss on both top and bottom lines.

The cheery tone Mr. Chapek exuded on the earnings call in the face of disappointing results only served to reinforce the perception that he wasn't up to the job. Disney's share price sank 13% the day after the report was released—the largest single-day loss for the longtime Dow component since the 9/11 terrorist attacks in 2001. Before Sunday's news, Disney's stock was down 22% from the day Mr. Chapek was named CEO. In contrast, the S&P 500 gained 34% in that same time frame. During Mr. Iger's first tenure, Disney outperformed the broad index by 213 percentage points.

Although Mr. Iger has not yet outlined his new plans for the company publicly, it seems safe to say that he will undo at least some of the changes that Mr. Chapek made that have proven to be most controversial within the Hollywood community. This includes an organizational structure that puts streaming first and takes the ultimate destination of films and shows out of the hands of the creative teams that produce the content.

Analyst Michael Nathanson of MoffettNathanson noted in a report Monday morning that Mr. Iger showed a preference for a more decentralized approach in his first run as CEO. Nathanson wrote that he would not be surprised to see Iger enact a similar effort this time around, and upgraded his recommendation on the stock to an outperform rating.

Mr. Iger still faces pressure from some shareholders. In September, Disney reached a deal with activist investor Dan Loeb of Third Point, who had been pushing the company to cut costs, pay down debt, and shake up its board. Now another activist investor, Nelson Peltz of Trian Fund Management, has reportedly bought an $800 million stake in Disney and is seeking a seat on the company's board. Trian has not commented publicly on the latest move, but The Wall Street Journal has reported that the activist does not think Mr. Iger should be back in control of the company.

But Mr. Iger's main job will be to fix what he didn't before. Succession at Disney has long been a dramatic affair, and Mr. Iger himself lost top candidates in the few years prior to Mr. Chapek landing the job.

Analyst Doug Creutz of Cowen wrote Monday that the latest move by Bob Iger to step down as CEO of Disney creates significant instability around the role. He noted that it is one unlike any other in Hollywood in that it involves managing both a massive movie and TV production business while also juggling theme parks, cruise ships and toys.

Mr. Iger did an excellent job during his first tenure as CEO, but his main task now is to ensure that Disney won't need him anymore. This presents a unique challenge, given that he is 71 years old.