Disney’s Profit Declines 18% in 1st Quarter

Walt Disney Co.’s profit fell 18% in its first fiscal quarter and would have dropped even more if not for a noncash gain stemming from its purchase of a large stake in Internet portal Infoseek Corp.

Disney’s continued weakness in profit reflects soft ratings for its ABC television network, higher costs for films and TV programming such as National Football League games, and weak home video results compared with a year earlier. Disney has also been spending heavily on new investments, such as theme park projects, its new cruise line and its Go Network project for the Internet.

Disney’s profit in the quarter was $622 million, or 30 cents a share, with revenue falling 4% to $6.6 billion. Without the Infoseek gain, profit would have been $470 million, or 23 cents. The results were at the lower end of the range of what analysts had predicted.

Disney’s gain from Infoseek reflected a noncash benefit of $345 million, the result of exchanging its interest in Starwave Corp. for a 43% stake in the portal.

Operating income in two areas, creative content and broadcasting, dropped sharply. Despite such movie hits as “The Waterboy,” “A Bug’s Life” and “Enemy of the State,” results in creative content--which includes such businesses as film, video and merchandise--fell 39% to $430 million.

Although Disney had a generally good holiday season in film, the company did have a major disappointment in “Mighty Joe Young,” which analysts have estimated cost $100 million to make.

Despite strong sales from “Lion King II: Simba’s Pride,” Disney’s creative content area was especially hurt by weaker video results compared with a year earlier, when the company was selling three strong titles, “Belle’s Enchanted Christmas,” “The Jungle Book” and “George of the Jungle.”

“They have fewer of the classic titles generating dramatic numbers,” said analyst Jeffrey Logsdon of Seidler Cos. in Los Angeles.

In addition, Disney’s creative content group was hurt by slow sales at Disney Stores, especially internationally.

Operating profit for its broadcasting area, hurt by weak ratings, fell 48% to $265 million. Disney mainly blamed its higher NFL costs, which the company said were only partially offset by revenue growth.

Theme parks showed the only gain in operating income, 17% to $335 million. The company is considering a second theme park at Disneyland Paris, and also is actively exploring whether to build a theme park in China.

In a statement, Chairman Michael Eisner said he was pleased with the performance of the company’s theme parks and resorts, as well as some of the films in the first quarter.

“However, our creative content and broadcasting operating results continue to reflect the challenges we began facing in 1998, including rising programming and production costs,” Eisner said.

Disney’s shares closed at $32.94, down $1.63, on the NYSE.

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