Pixar Confirms SEC Has Started Inquiry

Pixar Animation Studio Inc. confirmed Friday that the Securities and Exchange Commission had launched an inquiry into its operation, but the company would not provide details.

The Emeryville, Calif., computer animation studio, which has produced such hits as “Toy Story” and “Finding Nemo,” issued a brief statement saying it had fully complied with a request for information from the commission.

The SEC’s request to Pixar comes on the heels of a disclosure last month by DreamWorks Animation SKG that the SEC was looking into stock trading around the time the company announced disappointing home DVD sales of its film “Shrek 2.”

Although Pixar spokesman Nils Erdmann would not comment on the subject or scope of the inquiry, analysts speculated that it might concern the sharp drop in revenue reported by the company in its second quarter because of lower-than-expected DVD sales of its 2004 release, “The Incredibles.”

The SEC also declined to comment on the inquiry, first reported Friday in the Wall Street Journal.

Analysts said that at this point they had no reason to suspect Pixar had concealed information.

“In our dealings with Pixar, we note that the company has historically been transparent and aboveboard in communicating with investors and analysts,” wrote Katherine Styponias of Prudential Equity Group in a note to investors.

Styponias speculated that the Pixar inquiry could have been prompted by the commission’s investigation of DreamWorks, which has been sued by investors who have alleged that the studio did not report disappointing sales of the “Shrek 2” DVD to investors in a timely manner.

Analyst Marla Backer of Research Associates-Soleil said Pixar could have been caught up in SEC concerns over DreamWorks’ DVD revenue.

“I think the SEC wanted to make itself comfortable that the reporting of information [by Pixar] from the retail channel was done in a timely manner,” Backer said. “And I think Pixar did just that. They warned the street in advance.”

In June, Pixar Chief Executive Steve Jobs revised the earnings forecast for the company, slashing 5 cents a share off previous projections for the second quarter.

This month, Pixar posted a 66% plunge in profit for that quarter, blaming the slower-than-expected DVD sales.

Pixar shares dropped Friday on news of the SEC inquiry, falling $1.01 to $41.99.