'Narnia,' 'Cars' fuel Disney's Q3
'Narnia,' 'Cars' fuel Disney's Q3The Walt Disney Co. on Wednesday posted a hefty 39% increase in fiscal third-quarter profit, without help from the $790 million worldwide blockbuster "Pirates of the Caribbean: Dead Man's Chest."
Disney's quarterly results trounced Wall Street analysts' expectations, though Disney stock, after a short-lived pop Wednesday, finished fractionally lower to $28.83.
Disney made it clear that its impressive results ought to carry over to the next quarter and beyond with the "Pirates" booty rolling in and "Cars" headed for DVD, but investors weren't buying shares Wednesday, perhaps discouraged by some questionable stock-option grants at its Pixar unit.
Options scandals at about 80 companies have been hampering shares to various degrees, and reports surfaced Tuesday that several years before Disney's acquisition of Pixar, some top executives were awarded suspiciously timed stock options.
"We aren't aware of any basis at which Pixar options would have a material impact on our earnings," chief financial officer Tom Staggs told analysts Wednesday.
Disney earned $1.1 billion in the quarter, up from $811 million in the same quarter a year ago, as just about every asset ? a notable exception being the company's ESPN-branded mobile phone service ? performing well.
Revenue rose 12% to $8.6 billion, with the company's movie studio division undergoing a 17% growth spurt to $1.7 billion. The studio benefited from "Cars," now at $190 million in domestic boxoffice, and from DVD sales of "The Chronicles of Narnia: The Lion, the Witch and the Wardrobe." CEO Robert Iger said the latter is tracking to be the No. 1-selling DVD in the U.S. this year.
Iger told analysts that Disney is seeing great success in making money by moving franchises from one platform to the next. "Cars" is "a great example," he said, with attractions based on the movie planned for one or more of Disney's theme parks. And "Cars" merchandise is selling better than that of any other Disney movie except for 1994's "The Lion King."
He also cited "High School Musical" as a potentially fantastic franchise, as it already has proved a hit on TV and CD and ought to be Disney's best-selling TV-based DVD title.
"Pirates" is Disney's biggest cross-platform hit but the year's top movie only detracted a bit from Disney's bottom line this quarter because of marketing expenses. The movie and its not-yet-released sequels have analysts bullish on Disney for next quarter and for the long term.
One example of cross-platforming gone bad comes from the ESPN mobile phone initiative, of which Iger said Wednesday: "The results, at least initially, were disappointing, and we're monitoring this carefully."
Already proclaiming the Pixar purchase a rousing success, the CEO said he won't shy away from further acquisitions, and said he intends on increasing investments in video games and the Internet.
He said he sees "substantial upside" from Internet initiatives and is looking forward to the Disney.com relaunch that is forthcoming.
Some analysts agreed Wednesday. A note to clients from Standard and Poor's Equity research read: "We see various digital moves at ABC and ESPN likely fueling $500 million in fiscal 2006 Internet revenue."
Disney also said it sold its interest in US Weekly for $300 million, representing a more than sevenfold increase on an investment it made just five years ago.
Disney enjoyed a 10% revenue increase to $3.7 billion at its media networks division, where "High School Musical" and ESPN were standouts. It was a mixed bag at ABC, where ad rates were up but so were programming costs.
Theme parks scored an 11% rise in revenue to $2.7 billion, while the consumer products division saw a 6% revenue increase to $445 million.