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Despite pix perfs, Disney profits drop

Net income fell $138 mil from last fiscal year

Walt Disney took a 26% hit in fiscal third-quarter pro forma profit, as the Mouse House marked lower TV ad sales and theme-park attendance, and absorbed a $95 million charge for job-cutting costs.

The Burbank-based conglom — which touted quarterly box office perfs by pics including “Pearl Harbor,” “Bridget Jones’s Diary” and “Spy Kids” — said net income fell to $392 million in three months ended June 30, from $530 million in the same period of the previous fiscal year.

The fall-off was a bit less than expected. The year-ago figure is a pro forma calculation to account for Disney’s eliminating its loss-plagued Go.com portal within the last year.

In an “as-reported” comparison with actual year-ago operations, Disney’s profit climbed almost 9%.

Revenue dipped about 1% to almost $5.98 billion, though execs insisted conglom is poised for better days ahead.

“Once the economy begins to strengthen, we will be well-positioned for accelerating growth,” chairman and CEO Michael Eisner said.

Disney recently announced a deal to acquire Fox Family Channel and related domestic and international assets for $3 billion in cash and $2.3 billion in debt assumption. Eisner said the acquisition reps an important step toward building for a brighter Mouse future after economic stagnation lifts.

But Disney, which intends to rebrand the Fox cable web as ABC Family, revealed few new details of its planned strategy for re-programming the channel.

“It’s not just going to be a rerun channel,” Eisner said in a conference call with press and analysts, though he acknowledged the Mouse will replay some ABC shows on the channel.

Park flat

The nation’s economic downturn has kept Disney’s new California Adventure park in Anaheim from mounting as successful a launch as had been hoped for, execs said. Overall, revenue was flat in the theme parks and resorts division at $1.9 billion.

Disney prexy Robert Iger acknowledged advertising bookings in the wake of recent upfront presentations of fall shows “probably” will be down from a year ago. But there, too, officials suggested TV sales soon would firm up as the economy strengthens.

Revenue at media networks, which include the ABC broadcast and ESPN and other cable operations, decreased 6% to $2.1 billion. Broadcast sagged worse than cable, officials said.

Disney execs made little mention of talk that Disney might join in a consortium to bid on AT&T’s cable systems, and Eisner declined to address an analyst’s question about potential acquisitions. The Mouse topper did express a preference for content over distribution, but it’s believed Eisner still could join Comcast or others in the chase for AT&T cable-distrib assets.

Entertainment strong

Studio entertainment proved economy-resistant in the quarter, as revenue from theatrical and home entertainment releases including robust DVD sales increased 8% to $1.3 billion. Live-theater operations also marked increases, as “The Lion King” stage play broadened its run into additional cities.

Consumer products, which has been undergoing considerable restructuring of its Disney Stores and other operations, absorbed a 3% drop in revenue to $518 million. And in the Internet group, where Disney closed the costly Go.com portal, pro forma revenue plunged 17% to $38 million.

Analyst Jeffrey Logsdon of Gerard Klauer Mattison in Los Angeles applauded Disney’s ability to outpace Wall Street estimates in difficult times.

“It looks like they’re on their game,” Logsdon said. “But it’s a tough economy, and they’re obviously feeling the pain as much as anyone else.”

‘Pearl’ profits

Noting studio entertainment’s upbeat numbers, the analyst said profit from “Pearl Harbor” — including anticipated homevid sales and other ancillary revenue — was particularly welcome after early critical lambasting of the pricey pic.

“Who wouldn’t love a picture that’s going to make a profit of between $50 million and $100 million over the next two years?” Logsdon observed.

The Disney Stores and Go.com moves — and the shuttering of a DisneyQuest entertainment center in Chicago — collectively repped $43 million of the quarter’s $138 million in restructuring charges, with job-cut charges accounting for the balance. Disney’s recent moves to chop 4,000 positions companywide ultimately will save conglom $350 million a year, officials estimated.

Execs suggested the 3,000 voluntary and 1,000 involuntary layoffs also repped a move that would position Disney for a return to the growth track in future quarters. But chief financial officer Thomas Staggs declined to specify when things might brighten.

“Anybody who thinks they can read the crystal ball right now is mistaken,” Staggs said.

Merrill Lynch analyst Jessica Reif Cohen, while giving Disney high marks for cost-containment efforts, said she fears the Mouse will remain pinched by low ABC ratings and a tough economy for some time.

“There’s no relief in sight,” Cohen said. “This could go on for awhile.”

Over its first three fiscal quarters, the Mouse has seen a 1% uptick in pro forma revenue to $19.44 billion. Nine-month gains of 6% in studio entertainment revenue, 4% in parks and resorts, and 1% in Netcos offset declines of 6% and 2%, respectively, in consumer products and media networks.

The Mouse issued its results after the close of market trading. Disney shares — which lately have been trading close to a 52-week low of $26.15 set July 24 — ended the session down 17¢ at $26.50. Shares rose in after-hours trading.

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