Shares of Disney Fall on Concern of Future Revenue Growth

Shares of the media and entertainment giant Walt Disney (DIS Quote) fell sharply Thursday even as the company reported earnings that exceeded Wall Street's expectations.

Analysts worried that revenues will not grow in the coming quarter as demand for advertising slips, sports programming costs mount and the wildly successful Who Wants to Be a Millionaire game show on Disney's ABC television network loses its luster.

"It's totally explainable, the softness coming out of a very strong up front," said Robert Iger, Disney's president, speaking to analysts in a conference call. "We look at all the economic reports -- Scrooge McDuck is our chief economist."

Still, he said, "we don't see the dismal future that everybody is talking about."

But Wall Street was not reassured. Disney finished Thursday regular trading down $5.75, or 16%, at $31.13.

Many analysts credit the game show, at times shown on ABC on successive nights, for the broadcast network's 64.8% operating income growth. But its ratings have slipped among the 18-49 year-olds advertisers covet. During the quarter, networks had to compete with the Olympic Games for advertising revenues.

The coming quarter will also lack demand for political advertising, which disappeared Tuesday with the election.

Both Major League Baseball and the National Hockey League renegotiated their contracts with the all-sports network ESPN for higher rates this year, wrote Richard R. Read, an analyst for Credit Lyonnais Securities in a research report. Read, who rates the stock a hold, cited the higher costs as a factor in the disappointing 2% operating income growth reported by Disney's cable television operations, which include ESPN.

For the fourth fiscal quarter ended Sept. 30, Disney reported net income of $240 million, or 11 cents a diluted share, compared with a net loss of $48 million, or 2 cents a diluted share, a year earlier. Analysts had expected earnings of 7 cents a share in the latest quarter, according to a poll by First Call/Thomson Financial.

Revenue grew to $6.03 billion from $5.69 billion in the 1999 quarter.

Disney also said it would take a charge of $272 million in its first fiscal quarter, ending Dec. 31, as a result of accounting changes. Together, the broadcast and cable networks reported a 14% increase in revenue to $2.19 billion, and a 26% increase in operating income to $460 million. Revenue grew 12% at the broadcasting unit. Operating income at the cable TV unit rose 7 percent.

Theme parks and resorts, including Disneyland and Walt Disney World, reported a 10% increase in revenue. Revenue from the consumer products division declined 7%.

Shares of Disney Internet Group (DIG Quote) finished down 88 cents or 11%, at $6.75. The stock was created to track both online operations and direct marketing.

The online operation's revenue rose 9%, but direct marketing revenue fell 33%, resulting in a 6% overall revenue decline at the Internet group.