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Support for Iger Is Growing

Times Staff Writer

Thanks to good timing and intensive networking, Walt Disney Co. President Robert Iger’s bid to win the company’s No. 1 job is gaining momentum on Wall Street, with some investors and analysts now calling his elevation all but inevitable.

In recent months, Iger has broadened his base beyond longtime supporters in the investment community to those who’d once dismissed him as damaged goods, tarnished by the controversy surrounding his boss, Disney Chief Executive Michael Eisner.

“A year ago, people referred to him as an afterthought, an also-ran. Now you just don’t hear the same objections from investors,” said Patrick McGurn, senior vice president of Institutional Shareholder Services, which advised clients last year to withhold support for Eisner’s reelection to the board. “He seems to be carrying the mantle of front-runner.”

Investors and analysts say Iger -- the sole in-house candidate and now Eisner’s choice -- is mostly benefiting from Disney’s improved financial performance.

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The company’s net income rose 85% last year -- albeit from a low base. Those gains have been powered by the ESPN sports cable network and a recovery in theme parks. Disney’s stock price, which had taken a drubbing, has risen 18% during the last six months. Meanwhile, the company’s long-suffering ABC television network, which Iger oversees, has rebounded this season with two breakthrough hits: “Desperate Housewives” and “Lost.”

With Disney predicting another strong year for 2005, investors generally don’t foresee a management rout.

“They’ve got a cyclical rebound at hand, things seem to be going well, so why rock the boat?” said Peter Goldman, portfolio manager of Chicago Asset Management, which owns 481,000 shares of Disney.

For now, according to Disney sources, that also seems to be the thinking of a majority of Disney’s board members. But the selection process is in its early stages and much can happen between now and June, by which time directors have said they’ll name a successor to Eisner, whose contract expires in 2006.

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In fact, some investors remain ambivalent about Iger. “He’s spent so long under Eisner that it’s hard to know how strong a leader he would be on his own,” said Janna Sampson, portfolio manager of OakBrook Investments, which owns 789,000 Disney shares.

Then there’s Roy E. Disney, nephew of the company’s namesake, who led the shareholder revolt last year that led to the 45% no-confidence vote in Eisner and his subsequent removal as chairman. In a recent open letter to shareholders on his SaveDisney.com website, Roy Disney bluntly said “Iger is NOT an acceptable substitute” for Eisner. He did not say how he’d respond should the unacceptable occur.

Iger, 53, whose contract expires in September, also faces potentially formidable competition. The board is expected to review a list that includes News Corp. Chief Operating Officer Peter Chernin, Yahoo Inc. Chief Executive Terry Semel, Time Warner Inc. entertainment and networks chief Jeffrey Bewkes, as well as EBay Inc. CEO Meg Whitman and Viacom Inc.'s co-presidents, Les Moonves and Tom Freston.

But many in that lineup of media heavyweights are unlikely to join the fight because of contractual or financial incentives to stay put. Even if they did, Iger probably would be able to count on the support of some investors who themselves carry a powerful punch.

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“I think he’d be an excellent choice,” said Paul Eckley, senior vice president of investments for State Farm Insurance Cos., one of Disney’s biggest institutional investors with 42 million shares. “He knows the company in all its facets, he’s done some very positive things.”

Said portfolio manager Eli Salzman of Lord Abbett & Co., which holds 37 million shares: “Wall Street’s view of Bob has definitely gotten better.”

Still, Iger is taking nothing for granted.

In the last three months, he has met with 15 of Disney’s largest 20 shareholders to explain the company’s growth prospects and tout his own strategy for the future, including a stronger push into foreign markets such as India and China.

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“He’s been working hard to build relationships and get people comfortable that he knows what he’s talking about,” said one money manager. “It’s working to some extent.”

One of his appearances came during a media conference last week in Phoenix, sponsored by investment house Smith Barney. Iger was questioned by analyst Jill Krutick, who characterized his performance in a later report as “uplifting.”

She also offered a prediction.

“We believe that Bob Iger is the most likely successor to Michael Eisner,” wrote Krutick, who has a “buy” rating on Disney’s stock.

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She added that Iger’s “breadth of knowledge” of the company “should ensure a smooth transition.”


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