Beleaguered Disney chief looks vulnerable after earnings alert

Mickey Mouse lost his smile yesterday as the Walt Disney Company warned that depressed attendance numbers at its theme parks, coupled with slack advertising revenues at its ABC TV unit, spelled weakness for its fourth-quarter revenues.

Investors greeted the news with disappointment and shares in Walt Disney tumbled 11 per cent in morning trading in New York. The battering of Disney only extended the pall over media stocks in general, with AOL Time Warner continuing to suffer from extensive problems.

The strains at Disney are certain to undermine the status of Michael Eisner, its chief executive. Rumours have begun to circulate on Wall Street in recent weeks that without signs of a turnaround soon, his position at the company may be vulnerable.

Third-quarter results showed a 7 per cent decline in net income for the company. Attendance at its theme parks, which provide roughly a quarter of the company's total income, was off by about 6 per cent in the quarter.

While the numbers were slightly ahead of Wall Street expectations, it was the warning of a slow fourth quarter that most worried analysts and investors. The outlook sketched by Mr Eisner in a conference call was "decidedly more negative than our expectations," noted Jessica Reif Cohen, a leading media analyst at Merrill Lynch.

The tourist numbers at the theme parks worldwide appear to be down because of lingering fears of terrorist attacks as well as shaky confidence in the economy. The parks in the US have been hit also by economic turmoil in Latin America. Brazilians have traditionally visited Walt Disney World in Florida in large numbers.

But in the third quarter it was Disney's film studios that saw the biggest drop in income, in spite of the relative success of recent summer animated film release, Lilo & Stitch. Other films faired poorly, including Bad Company and nothing came close to matching the impact of Pearl Harbor released in the same period last year.

Income at the film studios was off 60 per cent, Mr Eisner said. Nor was the picture especially pretty at the company's media networks division, which includes ABC TV and ESPN, the sports network. Because of the tough advertising climate and disappointments in introducing or maintaining shows, income from the networks was down 40 per cent. The phenomenon of Who Wants to Be a Millionaire?, for instance, once a cash-cow, has all but evaporated.

Disney was also burned by troubles associated with stakes in the troubled cable company Adelphia as well as Germany's Kirch media. The impact on its numbers from those companies was between $50m and $60m, according to the chief financial officer, Thomas Staggs.