All is well in Disney's kingdom

Every biz segment sees double-digit Q2 profit gains

The feature films "Wild Hogs" and "Bridge to Terabithia," ESPN and the Disney Channel original movie "Jump In!" helped the Walt Disney Co. post a 27% rise in second-quarter profit.

Disney reported Tuesday that operating earnings in every segment of its business enjoyed double-digit growth — even at its studio division, where revenue dropped 13% year-over-year.

The company earned $931 million in its fiscal second quarter, up from $733 million in the same quarter a year ago on revenue that increased 1% to $8.1 billion.

Analysts were enthusiastic about Disney's numbers, especially because "Pirates of the Caribbean: At World's End," which bows May 25, should be a boon to its film studio unit in the second half.

However, Disney shares, which rose 1.4% to $36.55 during Tuesday's regular trading session, fell as much as 2.1% after the bell when earnings were released.

Disney CEO Robert Iger gave a nod to competitor Sony Pictures, telling analysts during a conference call that "the early success of 'Spider-Man 3' bodes well for the movie industry this year."

Disney's media networks division, which accounts for more sales than any other unit, posted no growth in revenue, with cable networks rising 7% as broadcasting fell 7%, though operating income was up 21%.

The company credited strong worldwide syndication sales of ABC's "Desperate Housewives," "Lost" and "Grey's Anatomy," though those gains were partially offset by costs from the Disney-branded mobile phone service.

No Super Bowl, fewer college bowl games and lower ratings in primetime at ABC caused a decline in broadcast revenue, though operating income got a boost from higher advertising rates and better ad inventory sales.

Studio entertainment revenue slipped to $1.6 billion from $1.8 billion a year ago when "The Chronicles of Narnia: The Lion, the Witch and the Wardrobe" and "Chicken Little" were enjoying success overseas.

"Hogs" ($159 million in U.S. boxoffice grosses) and "Terabithia" ($81.2 million) were the significant releases this time, while "Eight Below" and "Shaggy Dog" were a year ago.

Lower distribution and other expenses helped the studio post a 60% rise in operating income to $235 million.

Revenue for consumer products rose 14% to $516 million and operating income was up 20% to $125 million with standout performances from "Cars" merchandise and Disney Interactive Studios, the video game unit that used to be known as Buena Vista Games.

Revenue at the parks and resorts division was up 9% to $2.4 billion, while operating income advanced 19% to $254 million, with gains at Disneyland Resort Paris, Disneyland Resort and Walt Disney World partially offset by a decline at Hong Kong Disneyland.

Iger, as he is known to do, talked up Disney's digital potential, calling broadband entertainment an "important entertainment medium" and boasting that the redesigned Disney.com has provided significant increases in available online ad space.

The performance of "Meet the Robinsons," which hasn't wowed analysts, is not a reflection on the Disney-Pixar merger, Iger said, because it "was not a heavily Pixar-influenced film."

He said a better indication of how a combined Disney-Pixar is functioning will come with the release of "American Dog" next year.

He also defended Disney's decision to back the Blu-ray Disc in the platform war of next-generation DVD technology, predicting a widening advantage over the competing HD DVD as retailers are forced to free shelf space in favor of one platform over the other.

Disney CFO Thomas Staggs gave kudos to "Jump In," "Cory in the House" and "Hannah Montana" as well as Disney's music sales, led by music featured on the Disney Channel.

Staggs also warned that the studio division faces tough comparisons in the current quarter versus last year when "Narnia" was well on its way to becoming one of the year's best-selling DVDs.

"The company should continue to experience better operating performance and momentum than many of the other large entertainment conglomerates," Prudential Equity Group analyst Katherine Styponias said.

"Disney segments continue to be firing on all cylinders," said Goldman Sachs analyst Anthony Noto, predicting that operating income this year will grow 18% or more "with or without a robust ad or economic environment."
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