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Disney's Fiscal 2nd-Qtr Profit Rises 33% on Video Sales

25 Apr, 2001 By: Bloomberg News

Walt Disney Co. said fiscal second-quarter profit rose 33%, beating analysts' estimates, as it sold more videos of Disneymovies including Lady and the Tramp II.

Profit from operations was $391 million, or 19 cents a share, in the quarter ended March 31, the company said in a statement. Disney earned$294 million, or 14 cents a share, a year earlier. Revenue declined 3.8% to $6.05 billion from $6.29 billion.

Operating income at Disney's film studio more than tripled, helping thecompany boost profit even as advertising sales and audience ratings fellat the ABC television network. Cost-cutting also helped Disney's profit top the 13-cent-a-share average estimate from analysts polled by First Call/Thomson Financial.

"The earnings were solid, given how difficult the environment is," said Wit SoundView analyst Jordan Rohan, who has a "buy" rating on the stock. "If things are this good, can you imagine when the economy gets a little better? It means they would have wind at their back for once."

Executives at the Burbank, California-based company highlighted the film studio's performance in the quarter.

"We do have a very valuable library," Disney chairman and c.e.o. Michael Eisner said on a conference call with analysts. "We're able to make a Lady and the Tramp II direct to video and ithas knowledge in the marketplace."

Chief financial officer Thomas Staggs said on the conference call thatDisney may be able to beat its previous forecast of single-digit percentage growth in earnings per share this fiscal year if the filmstudio's strong performance continues.

Operating income from Disney's studio entertainment division rose to $175 million from $59 million, led by sales of films including Lady and the Tramp II: Scamp's Adventure, Remember the Titans andDinosaur on videocassette and DVD.

The company's Miramax Films unit last weekend had the two top-grossing movies in the U.S. and Canada, Bridget Jones's Diary and SpyKids. Later this year, the flagship Disney studio will release whatanalysts consider a promising slate of summer films, including the big-budget World War II picture Pearl Harbor.

Studio entertainment revenue rose 5% to $1.57 billion in the quarter.

The studio's performance helped offset a decline in operating income at Disney's media networks division, which includes ABC. The division's operating income fell 7.7% to $527 million.

Along with a slowing U.S. economy, Disney's networks face the threat of strikes by Hollywood writers and actors. Disney president Robert Igersaid on the conference call that he is "optimistic things are going to get resolved" without a strike. Iger is an adviser to the studios'bargaining committee that's negotiating with the writers and actors.

The company took charges totaling $1 billion in the latest quarter to close its Go.com Internet search site and about 70 Disney stores. About $820 million of that was a non-cash charge to write off intangibleassets.

The charges and a change in accounting rules made the final loss $567 million, or 26 cents a share. That compares to a profit of $77 million, or 8 cents a share, a year earlier.

Disney shares fell $1.45 to $28.58 Tuesday in New York Stock Exchange trading. The shares have fallen 29% over the past year. The shares rose as much as 6.7% to $30.50 in after-hours trading.

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