Wall St. says ho-hum to Par news

Paramount appears to have weathered the loss of Brandon Tartikoff quite well on Wall Street, for now.

Analysts had already discounted the stock in the near term because of an uneven fourth quarter, but several expressed mixed feelings about how well Paramount would fare in the coming months when Tartikoff’s successor is put in place.

And if investors were looking for direction, there wasn’t one. While the stock hardly budged, dropping just 37 cents to $ 43 a share, trading volume was up to 1.4 million shares, more than three times the activity on Wednesday.

Recently, there have been some grumblings of Par’s near-term performance. On Monday, Goldman Sachs & Co. downgraded the stock because of lower expected earnings in the short term. That pushed the stock down nearly $ 2.

Then, Oppenheimer & Co.’s Jessica Reiff lowered her estimates, with a recommendation for investors “to switch out of Paramount and into Disney,” a studio that has two potentially strong Christmas features.

The general opinion among Paramount watchers was that, despite Tartikoff’s claims, his relationship with Stanley Jaffe had begun to fray.

Much to be desired

Indeed, most analysts think that Tartikoff’s track record left much to be desired with Jaffe and Paramount chairman Martin Davis.

“Just look at the facts,” said one. “Everyone knows about the friction between Brandon and Stanley. Brandon just came back from a monthlong promotional tour for his book, which management was unhappy about. … While people are sympathetic (about his family obligations), many people on the Street aren’t buying the explanation” for his exit.

Regardless of whether Tartikoff was pushed or left on his own accord, Mario Gabelli, who with around 6% of the stock is Paramount’s largest shareholder, downplayed his departure. He claims he’s still a buyer.

“I think there’s still plenty of critical mass at Paramount. It doesn’t change my attitude,” said Gabelli. “We’ve seen many changes at production companies, but they continue to thrive. Whatever the reasons, the point is it would have been nicer if he’d had 20 hits, rather than him leaving sotto voce.”

Clearly, though, the next act to follow Tartikoff’s uneven tenure gives analysts some anxiety. Despite Jaffe stepping in as acting chairman of Paramount Pictures, one worry among analysts is the disruption that typically takes place when a new executive takes over a studio.

“I don’t think anyone can interpret this as anything but negative,” said one Wall Street analyst. “There’s bound to be disruption. Jaffe will step in, but new management will bring in their own team, new projects. That creates uncertainty over the development schedule. When management changes, there’s often a writeoff.”

But Par is still a good play, insisted Chris Dixon of PaineWebber Inc. He noted that Jaffe is an experienced producer and will manage a smooth transition. Plus, the film side is just one component of earnings.

“Clearly, Paramount is one of the few studios with depth of management both below and above,” said Dixon. “It’s a very attractive, valued stock. The strength of 1993 and 1994 growth will continue to be expanding firstrun syndication, the integration of new businesses acquired of the past several years and the continued opportunities in publishing.”

The question, he added, is whether the company can maintain its momentum next year, when the slate includes several big films, such as the Tom Cruise-Sydney Pollack film “The Firm” and planned sequels to “Addams Family” and “Wayne’s World.”

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