Disney Says It’s on Way to Recovery

Walt Disney Co. Chairman Michael Eisner said Friday that he plans no substantive changes in corporate strategy even though the firm’s TV and theme park divisions have been pummeled by last week’s terrorist attacks and its stock price dropped to a seven-year low this week.

In separate wide-ranging interviews, Eisner and senior executives sought to reassure investors that Disney’s stock will rebound, and promised no major layoffs as a fallout from last week’s tragedies. But they said additional cost-cutting measures such as reducing theme park operating hours are likely.

Disney will soon unveil an extensive marketing campaign on its ABC, ESPN and other networks in an attempt to lure back patrons to the company’s theme parks, movies and TV shows.

“We’re going to use our own media companies to make sure the word gets out that it’s a good idea to have a good time after a period of mourning--to come to our parks, movies and buy ‘Snow White’ on DVD,” Eisner said.

Last week’s events adversely affected major media companies, such as Disney, because of sharp declines in advertising revenue stemming from the round-the-clock news coverage and a reluctance by advertisers to jump back into the market.

But Disney was particularly hard hit because prolonged travel worries could cut the number of tourists visiting its theme parks, which provide about 35% of the company’s operating income. Although the company declined to provide figures, attendance at the two Disney parks in Anaheim and at Disney World in Orlando, Fla., have declined substantially since the terrorist attacks.

Disney already was reeling from the softening economy that threatens advertising and tourism, consumer-products sales that are off 50% over the last three years and troubles in its animation division, which eventually will cut nearly 500 jobs. Overall, the company eliminated 4,000 jobs earlier this year as part of an ongoing cost-cutting program.

On Friday, Disney’s stock closed at $17.87 on the New York Stock Exchange, up 89 cents.

Eisner said Disney’s businesses already are showing signs of recovery, although he did not offer any specific numbers. He said the comeback reflects the public’s desire--and even his own--for diversions such as movies, TV shows, theme parks and sports amid the grim news.

“By Monday, I thought it’s too bad ‘Monday Night Football’ had been canceled” on the ABC network, Eisner said.

Disney also is counting on a financial lift soon from the DVD premiere of “Snow White and the Seven Dwarfs” next month and the November release of Disney and Pixar’s new film, “Monsters Inc.”

But others suggest that Disney’s recovery won’t be so quick.

Jordan Rohan, an analyst with Wit SoundView, estimates the company’s cash flow--earnings before interest, taxes and other expenses--will decline by $1.4 billion next year as theme park and broadcasting revenue drops.

“In the near term, the recent business disruption will be a bit painful for Disney,” Rohan said.

Disney Chief Financial Officer Thomas Staggs conceded that the company will see short-term declines in theme parks, consumer products and broadcasting, but he said it was too early to quantify the effect.

“It’s dangerous and almost certainly misleading to take the initial behavior of people as a bellwether for what may be happening a month from now,” Staggs said.

Added Disney President Robert Iger: “We’re not allowing ourselves to overreact to our experience of the last 10 days.” Like other entertainment companies, Disney tightened security Friday in the wake of a warning by the FBI that film studios in California could be terrorist targets after any U.S. airstrikes in Afghanistan.

As Eisner arrived for work Friday, he said, he circled the company’s Burbank lot to make sure no suspicious cars were parked on surrounding streets.

“I am totally comfortable in my office,” Eisner said. “I am totally comfortable on our lot.”

Eisner cautioned that Hollywood should take precautions but not overreact to uncorroborated threats. He compared the security concerns Disney faces at its theme parks to those the company dealt with during the Persian Gulf War, which helped trigger a decline of several million visitors and also prompted anxieties over security.

Eisner said he has been meeting with film and TV executives, as well as Disney producers such as action specialist Jerry Bruckheimer, about whether upcoming projects are appropriate in the wake of the attack. Disney postponed the Tim Allen comedy “Big Trouble” about a nuclear bomb smuggled aboard an airplane.

Eisner also indicated his disapproval of comments made by Bill Maher, host of ABC’s late-night show “Politically Incorrect,” that recent U.S. military actions were cowardly. The comments prompted Sears and FedEx to withdraw ads from the show. Eisner said he made his opinion known to ABC executives but stopped short of detailing what he said.

Although clearly frustrated that Disney’s stock is trading so low, Eisner said he does not fear any potential takeover offer. He predicted the stock will soon recover, adding that other media stocks, such as AOL Time Warner and Viacom, have suffered.

“To most people, it’s still only a piece of paper with a dividend. The fact that piece of paper is less valuable than it was the day before is significant, but it’s not the end of the world. The piece of paper will be more valuable tomorrow than it was today,” Eisner said.

Eisner commented on Thursday’s move by the wealthy Bass family of Texas to jettison 135 million shares--6.4% of Disney’s stock--to raise cash for margin loans and other financial needs. Disney repurchased 50 million of those shares at $15 each.

“I feel bad for them. We benefited somewhat by their loss. We were able to acquire 50 million shares at a price that four months ago would have been unthinkable,” Eisner said.

Disney’s stock in the last year has lost more than half its value from its 52-week high of $42 a share. It plunged nearly 25% this week after the market reopened following the attacks. Disney executives said the current stock price won’t affect the company’s plans to acquire Fox Kids Channel in November. As for Disney’s possible investment in AT&T; Broadband, Eisner said, “We continue to talk to them.”

Eisner said one reason Disney is not scrambling to change its strategy is that major projects such as the California Adventure and Tokyo DisneySea theme parks are finished, with a second park in Paris close to being completed. As for a potential third park in Anaheim, theme park chief Paul Pressler said it is still in the very early stages.

Eisner said that as troubling as last week’s events were, his experiences dating back to the 1960s, when he was an ABC executive, have taught him that people resume their hunger for entertainment.

“We’ve had some pretty horrible things happen in my career,” he said. “Generally they dissipate, they become part of a horrible history, and people move on with their lives. . . . The fact of the matter is we’ve been here before.”