Disney's Eisner faces pressure for profits
Bloomberg News
BURBANK, Calif. — Walt Disney Co. Chief Executive Michael Eisner faces pressure from shareholders to revive growth at the country's second-largest media company, whose stock has fallen 34 percent in the past year.
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Eisner has presided over a string of disappointments in that time. Audience ratings at the ABC network have fallen 20 percent. The flagship Disney studios dropped to fifth place this year from first in U.S. market share as movies such as "Pearl Harbor" failed to live up to Eisner's expectations. Attendance at Disney World and Disneyland is down 5 percent or more.
Michael Eisner has seen Disney Co. profits go down 3.2 percent.
Fewer hit TV shows and movies, coupled with the slowest U.S. economy in a decade, cut fiscal third-quarter profit from operations 3.2 percent, driving stocks down 7.3 percent since April 1.
The lower the stock falls, "the more likely you are to see a merger," said John Waterman, chief investment officer at Rittenhouse Financial Services, which owns Disney shares.
A transaction between Disney and another company, or an outright purchase of Disney, is a highly speculative scenario, Waterman and other investors said. Eisner has been more cautious than CEOs at rival media companies when it comes to making acquisitions.
The company is considering a possible investment in AT&T Corp.'s Broadband unit, the largest U.S. cable-TV provider with about 15 million subscribers, Disney President Robert Iger said. The move would reverse Eisner's longtime stance that the company doesn't need to own distribution assets.
Disney's profit, before an accounting change, restructuring and impairment charges and a gain on the sale of businesses, fell to $479 million, or 23 cents a share, for the period ended June 30 from $495 million. The biggest drop in profit was expected in Disney's media networks unit, as lower advertising sales hurt results at ABC.
The decline comes a year after ABC's hit quiz show "Who Wants to Be a Millionaire" boosted ABC to first from third place in the audience ratings. The show lifted Disney's slumping profit and added about $8 to its share price. But some analysts said its ratings have begun to decline because the show is suffering from overexposure.
The company now needs another hit, either in TV or film, to boost the stock price and earnings, as well as an end to the current U.S. economic slump, analysts said.
Without that, Disney has cut about 4,000 jobs and closed businesses such as its separately traded, unprofitable Disney Internet Group to save about $850 million a year. Disney still expects percentage growth in earnings per share in the "high" single digits for the fiscal year ending Sept. 30, Chief Financial Officer Thomas Staggs said.
