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Weak fiscal 1999 drops Disney stock

Eisner warned flat earnings ahead

NEW YORK — Shares of Walt Disney Co. plunged Friday after the company reported weak financial results, rendered no less palatable by chairman-CEO Michael Eisner’s newly minted accessibility to Wall Street.

Disney stock dropped 8% to $24.31 following news that net profit fell 30% for the 1999 fiscal year and that revenues barely budged. During his first-ever conference call with analysts and investors to discuss the numbers, released late Thursday, Eisner warned of flat earnings for the current fiscal year, meaning that no upswing is likely until sometime in 2001.

Consumer products and homevideo are the two biggest trouble spots. Costs for TV programming and production have also spiraled upward. At ABC, Disney disappointed many Wall Streeters who were hoping for a big writeoff for the network’s costly NFL package. That writeoff didn’t come.

Wait for a rebound

“Disney remains in a tough transition,” said Salomon Smith Barney analyst Jill Krutick. In a note to clients, she said the company’s stock price, even given its recent weakness, still reflects some built-in expectation that the company can successfully turn itself around. She and others seem confident that it will, although the timing of a rebound isn’t clear.

Eisner didn’t offer a drastic cure for Disney’s troubles or pull any rabbits out of his hat, as many investors had hoped. Instead, he outlined an across-the-board strategy of trimming capital spending, cutting costs and eliminating redundancies that have resulted from the company’s rapid growth in recent years. These measures should lead to some $500 million in annual savings starting in 2001. Taking a number of steps to buck up the licensing business and breathe some new life into Disney Stores, he’s also planning to unveil a new DVD-focused homevideo strategy soon.

Disney has already whittled down investment at its film studio, currently one of its most profitable operations, by $500 million.