Tuesday, August 01, 2006

Wall Street Journal Looks at Disney

Today's WALL STREET JOURNAL has a big article on Robert Iger's first ten months at the helm of the Disney Company. Because the JOURNAL hides these choice pieces behind an on-line subscription wall, we offer a few bits of it -- with wise-guy comments -- here: In his first ten months on the job, Walt Disney Co. Chief Executive Robert Iger launched into a frenzy of deal making and corporate reshaping that helped drive the stock price more than 20% higher.. Now, as the dust settles, investors have shifted their gaze to next year, and some don't like what they see, prompting a string of analyst downgrades and estimate tweaks... The Journal says that Iger's big, bold deals have "put investors on edge." Say what? The company stock was down at the end of Michael Eisner's term of office, and now has a price/earnings ratio of 20. after rocketing up for nine months. This is five points higher than the broad market for domestic stocks, but still two points below Fox News Corp. So who can be on edge? Rupert Murdoch? Our take: Robert Iger pretty much had to throw some long passes when he took over, if only to get out of Michael E.'s shadow. And it's paid off: Disney has been one of the best-performing stocks in media: Since Mr. Iger took the reins October 1, the stock has rallied more than 22%, compared with about 6% for the Dow Jones Average... Our take: Disney has one of the stronger international brands operating, and that is pretty damn strong. Sure, the theme parks could always take a hit (they ate it big time at 9/11), plus the film unit didn't do great last year. But that was then and this is now. When a single company has the two highest grossing films for the year, how bad can that be? Analyst Kathy Styponias believes Disney's stock will continue to do well for three reasons: no other entertainment conglomerate has articulated it strategy as well as DIsney; the company has a strong focus on return on invested capital; and there are few alternatives to put money to work. Other analysts caution about the future performance of Disney theme parks, the treacherous waters for Disney filmed entertainment, etc. etc. They point out that "Cars" could even be considered an "under-performer" in relation to other Pixar flicks. Our view: We should all be so lucky as to have the #2 movie in the marketplace viewed as an under-performer. But of course, it's true that the movie-going public is fickle, and that sometimes there's not much even the smartest movie executive can do about it. We remember how a decade back, the head of Sony/Columbia Pictures was summarily dismissed when he had two years of box office bombs. Sure enough, the year after his departure, most of the films he'd greenlit in his final twelve months of CEO-hood became smash hits. Too bad for him that he was gone, and that his successor got to bask in the bright glint of movie gold. But that's Hollywood.


Anonymous said...

Thanks for putting things in perspective. We all know the mainstream press tends to have trouble getting a realistic read on our industry.

Anonymous said...

These "analysts" make me sick. I wonder how they even get out of bed in the morning.

Don't go to work today. You might get hit by a truck.

Business is always business with the usual ups and downs. Who needs these analyst bozos anyway?

Anonymous said...

I think History will look at Iger as the Mikail Gorbachov of Disney. Everyone thought Gorby was just another inside yes man, but once in the drivers seat he saw the problems and attacked them with bold new ideas.
I was on the lot last year during Herbie Fully Loaded. The offices were full of execs doing nothing but pulling a check. The stables needed washing, and he's doing it.

Steve Hulett said...

Everyone was lolling about, waiting for Michael to step down from the throne (assisted in his exit, of course, by Roy Disney.)

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