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Analyst Lowers Estimates on Disney, News Corp.

27 Apr, 2009 By: Erik Gruenwedel

A week before The Walt Disney Co. and News Corp. report financial results, Pali Capital analyst Richard Greenfield lowered operating income estimates for both media giants — without blaming home entertainment.

Greenfield, in separate notes, said operating income for Disney’s second quarter and News Corp.’s third quarter (both ended March 31) would fall 32% and 50%, respectively.

Operating segments for the companies include 20th Century Fox Home Entertainment and Walt Disney Studios Home Entertainment, respectively.

Greenfield said broadcast advertising declines (both companies) and modest theme park attendance reductions (Disney) contributed to the revised projections.

“If the advertising picture improves earlier than we expect, Disney would likely exceed our forecast,” Greenfield wrote.

He also lowered fiscal year 2009 studio entertainment operating income to $530.6 million from $570.7 million. Revenue remained flat at $6 billion.

For News Corp., Greenfield said the company’s impressive film slate is heavily weighted toward the fourth quarter.

Indeed, the analyst lowered fiscal year filmed entertainment operating income to $834 million from $876 million. Revenue remained relatively flat at $5.7 billion.

“While we have become more excited by News Corp.’s film prospects, we are increasingly concerned that its sustainable growth drivers [including MySpace.com] are dwindling,” he said in a note. “MySpace is in total disarray.”

Greenfield said CEO Rupert Murdoch’s reluctance to shutter newspaper and TV assets would hurt the company over the next couple of years.

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