Luv2Roam
DIS Veteran
- Joined
- Jun 3, 2000
Thursday August 8, 8:20 pm Eastern Time
Disney Pressured by Investors
By Doug Young
LOS ANGELES (Reuters) - A rift has opened on the board of Walt Disney Co.(NYSE: DIS - News), with some members urging CEO Michael Eisner to make major changes while others think he can fill the cracks that have sucked Disney's stock to a near eight-year low, sources said on Thursday.
"The board is under increasing pressure by institutions (and) institutional shareholders to be far more proactive and do something about this," said one informed source.
The source said some board members have talked with Eisner about their concerns over Burbank, Calif.-based Disney's recent performance and declining stock price.
The company owns the Walt Disney World resort in Florida and Disneyland theme park in southern California, as well as a movie studio, cable TV networks and the ABC broadcast network. The parks and ABC, in particular, have fallen on tough times.
Despite the criticism, at least one other board member, Irvine Co. Vice Chairman Raymond Watson, defended long-time chairman and chief executive Eisner.
Watson said pressure is not mounting, and that much of Disney's woes stem from the broader economic downturn.
"From our point of view, we have a very solid company," Watson told Reuters. "We're in a business that, like a number of businesses right now, are being hit by a number of factors."
Watson said he has not been contacted by an institutional shareholder, nor, in his opinion, is the board inclined at this time to change top management.
Neither side of the board schism is calling for Eisner's departure, but the talk from both comes as Disney's stock hovers near lows they haven't seen since November 1994.
Shares bounced back in Thursday trading, with Disney, a Dow Jones Industrial Average(CBOT:^DJI - News) component, up 4.3 percent to $14.50 amid a broader market rally that saw the Dow rise 3 percent and the S&P 500 up 3.3 percent. The company has traded in a 52-week range between $13.75 and $27.65.
WEAK NETWORK, WEAK PARKS
Much of Disney's recent woes stem from the weakness at its ABC television network, which fell from No. 1 in the ratings just two years ago to No. 3 among the top three networks amid a dearth of hits.
After losing ground all year, Disney shares plunged anew this past week after the company disclosed that its theme parks, which accounted for 40 percent of operating income last year, were seeing weaker attendance in the current quarter, which would lead to even lower earnings.
Analysts said a board schism like the one that appears to be happening at Disney is not unusual, nor is it necessarily unhealthy.
"Up to a point, dissension is healthy," said one analyst, who spoke on condition his name not be used. "If you cross a certain point, however, the likelihood is that the uncertainty will create some distress in the stock. I don't think we've reached that point yet."
The analyst also said it is uncommon for institutional shareholders to contact company board members, but such contact is also not unheard of.
"It's not something that would be expected in most cases," he said. "But it's not impossible, not unheard of, because there are some important shareholders at the institutional level who certainly would be able to canvas the board members and make their opinions known."
Whatever the situation, analysts and board sources from both sides of the issue agreed that Eisner's job is not yet in danger, in part because he would be very difficult to replace.
"All (getting rid of Eisner) would do is say to the world that we've done something," Watson said. "I think it would be a fatal mistake. We're very supportive of Michael Eisner, very supportive of (Disney President) Bob Iger."
Disney Pressured by Investors
By Doug Young
LOS ANGELES (Reuters) - A rift has opened on the board of Walt Disney Co.(NYSE: DIS - News), with some members urging CEO Michael Eisner to make major changes while others think he can fill the cracks that have sucked Disney's stock to a near eight-year low, sources said on Thursday.
"The board is under increasing pressure by institutions (and) institutional shareholders to be far more proactive and do something about this," said one informed source.
The source said some board members have talked with Eisner about their concerns over Burbank, Calif.-based Disney's recent performance and declining stock price.
The company owns the Walt Disney World resort in Florida and Disneyland theme park in southern California, as well as a movie studio, cable TV networks and the ABC broadcast network. The parks and ABC, in particular, have fallen on tough times.
Despite the criticism, at least one other board member, Irvine Co. Vice Chairman Raymond Watson, defended long-time chairman and chief executive Eisner.
Watson said pressure is not mounting, and that much of Disney's woes stem from the broader economic downturn.
"From our point of view, we have a very solid company," Watson told Reuters. "We're in a business that, like a number of businesses right now, are being hit by a number of factors."
Watson said he has not been contacted by an institutional shareholder, nor, in his opinion, is the board inclined at this time to change top management.
Neither side of the board schism is calling for Eisner's departure, but the talk from both comes as Disney's stock hovers near lows they haven't seen since November 1994.
Shares bounced back in Thursday trading, with Disney, a Dow Jones Industrial Average(CBOT:^DJI - News) component, up 4.3 percent to $14.50 amid a broader market rally that saw the Dow rise 3 percent and the S&P 500 up 3.3 percent. The company has traded in a 52-week range between $13.75 and $27.65.
WEAK NETWORK, WEAK PARKS
Much of Disney's recent woes stem from the weakness at its ABC television network, which fell from No. 1 in the ratings just two years ago to No. 3 among the top three networks amid a dearth of hits.
After losing ground all year, Disney shares plunged anew this past week after the company disclosed that its theme parks, which accounted for 40 percent of operating income last year, were seeing weaker attendance in the current quarter, which would lead to even lower earnings.
Analysts said a board schism like the one that appears to be happening at Disney is not unusual, nor is it necessarily unhealthy.
"Up to a point, dissension is healthy," said one analyst, who spoke on condition his name not be used. "If you cross a certain point, however, the likelihood is that the uncertainty will create some distress in the stock. I don't think we've reached that point yet."
The analyst also said it is uncommon for institutional shareholders to contact company board members, but such contact is also not unheard of.
"It's not something that would be expected in most cases," he said. "But it's not impossible, not unheard of, because there are some important shareholders at the institutional level who certainly would be able to canvas the board members and make their opinions known."
Whatever the situation, analysts and board sources from both sides of the issue agreed that Eisner's job is not yet in danger, in part because he would be very difficult to replace.
"All (getting rid of Eisner) would do is say to the world that we've done something," Watson said. "I think it would be a fatal mistake. We're very supportive of Michael Eisner, very supportive of (Disney President) Bob Iger."
