SEC inquiry could focus on DVD sales woes
A heat wave of a different sort has struck Pixar Animation Studio as summer winds down: The Securities & Exchange Commission has launched an informal inquiry after a falloff in projected DVD sales led to a revenue miss.
Steve Jobs’ Pixar confirmed the probe on Friday but declined to say what it was about.
Wall Streeters immediately speculated that it parallels the SEC’s informal investigation of DreamWorks Animation.
Pixar said it had received an “informal request for information from the SEC, as companies do from time to time, and we believe we have fully complied with that request.”
The SEC launched an informal inquiry of DreamWorks Animation after DreamWorks posted a revenue miss due to lower-than-expected DVD sales of “Shrek 2.”
DreamWorks Animation didn’t warn investors in advance, inciting a raft of shareholders to file class-action lawsuits. Among other things, the SEC is looking into stock trading around the time of the disclosure.
Likely hoping to avoid the same fate, Pixar gave advance notice to investors of the second-quarter revenue shortfall, which it attributed to lower-than-expected DVD sales of “The Incredibles.”
Analysts speculated Friday that the SEC could be looking into why the two animation studios didn’t reveal the high rate of DVD returns for “The Incredibles” and “Shrek 2” earlier. They said Pixar could be on better ground since it gave some advance notice.
Prudential Equity Group analyst Katherine Styponias said in a note to investors that Pixar has “historically been transparent and aboveboard in communicating with investors and analysts.”
Also, Pixar’s revenue shortfall was smaller than that at DreamWorks.
Some Wall Streeters said it’s possible the SEC is just covering its bases with Pixar in light of the DreamWorks probe.
Pixar shares fell $1.01 to close at $41.99 in trading Friday, a loss of 2.3%. DreamWorks Animation shares fell 4¢ to close at $25.21.