Disney, Viacom Beat Estimates

Walt Disney Co. reported a profit turnaround Thursday for the latest quarter despite declining income at all four of its business units, while media rival Viacom Inc. posted a significant loss because of an accounting write-off related to its Blockbuster Video unit.

But excluding extraordinary items, both companies beat Wall Street’s expectations, despite being hurt in the quarter by a sluggish economy and a downturn in advertising.

Officials at Disney and Viacom indicated that the advertising recovery seemed to be underway, and that has helped fuel a run-up in both stocks so far this year.

Advertising accounts for 50% of revenue at Viacom, which owns the broadcast CBS and UPN networks; cable channels, including MTV, BET and Nickelodeon; the Infinity Broadcasting radio group; and an outdoor billboard unit.

Disney also is advertising-dependent because of its ABC network, radio and television stations, and cable channels, including ESPN, Disney Channel and ABC Family.

At Disney, cost cutting helped turn a profit of $259 million, or 13 cents a share, for its fiscal second quarter, ended March 31. That contrasts with a loss of $567 million, or 26 cents, in the same quarter last year, when the company wrote off $996 million in costs for shutting down its Go.com Web site and some retail stores. Analysts expected earnings of 10 cents a share for the latest quarter, according to Thomson Financial/First Call.

Disney’s revenue declined 2% to $5.9 billion from $6.05 billion.

Although ABC’s declining ratings hurt its television network division, Disney officials were buoyed by signs of improvement at its theme parks. President Robert Iger characterized an uptick in international travel as “gradual rather than dramatic,” and said a shift in strategy at the consumer products division also was starting to show results.

“The message of the second quarter, as with the first, is that Disney continues on track,” said Disney Chief Executive Michael Eisner.

At Viacom, a $1.5-billion write-down on the value of Blockbuster to conform to new accounting rules resulted in a first-quarter loss of $1.11 billion, or 63 cents a share.

Excluding the accounting change, Viacom earned $367 million in the quarter, or 21 cents a share, besting Wall Street’s estimate of 16 cents a share. A year earlier Viacom earned $354million on the same accounting basis.

Revenue fell 1% to $5.67 billion from $5.75 billion.

Viacom officials predicted that the yearlong advertising slump had hit bottom. President Mel Karmazin said Viacom profit would grow at a double-digit rate for the year. He said TV and radio advertising has increased recently, after declining by 9% and 4%, respectively, in the first quarter.

The bright spot for Viacom was its cable networks, where quarterly sales increased 5% and cash flow improved by 12% over the previous year. MTV had its highest-rated first quarter ever among viewers aged 12 to 34, because of the popularity of “The Osbournes,” a new reality show based on musician Ozzy Osbourne’s family. Revenue at the entertainment division, which includes Paramount Pictures and Simon & Schuster publishing, climbed 7%, and cash flow was up 1%.

Viacom shares closed at $49.81, down 38 cents, on the New York Stock Exchange. Disney shares were up 48 cents to $25 on the NYSE.

Meanwhile, electronics and entertainment giant Sony Corp. posted a lower-than-expected fiscal fourth-quarter loss Thursday. But Sony predicted a strong rebound in profit for this fiscal year because of brisk sales of its PlayStation 2 video game consoles.

For the quarter ended March 31, Sony posted a loss of $43 million, contrasted with a profit of $122million a year earlier. Sales fell 2% to $14.3 billion.

Sony said its turnaround will get even stronger in the months ahead and predicted income of $1.2 billion for the fiscal year ending in March 2003.

For the fiscal year just ended, Sony’s profit fell 9% to $119 million, while sales rose 4% to $59 billion.

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Times wire services were used in compiling this report.