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Iwerks' Tightened Belt Lassos Profit; Revenue Climbs 8%

Turnaround: New CEO has closed offices, reduced staff and refocused operations.

August 13, 1996|BARRY STAVRO | TIMES STAFF WRITER

Iwerks Entertainment Inc. made its name with giant-screen movie theaters and motion-simulator rides.

Turning this entertainment magic into a profit, however, was a trick Iwerks couldn't seem to master. The company lost $8 million in 1994 and was about to post a $13.5-million loss last year when Roy Wright was promoted to chief executive of the Burbank-based company.

Wright said he'd make Iwerks profitable by 1996, and he has made good on the pledge.

For the fiscal year ended June 30, Iwerks posted a $3.1-million profit on an 8% rise in revenue to $48.5 million. Iwerks' stock price, which hit a record $37 a share in 1993 only to sink to $4.625 a year ago, is climbing again. It closed Monday at $8.875 a share, up 12.5 cents, on Nasdaq.

"We did 10 different things in the past year; all of them amounted to tightening our belts," said Vito Sanzone, Iwerks' vice president of marketing.

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Wright closed an office in Florida and another in Newport Beach, consolidating them in Burbank. The company had already started pruning staff; it now has 175 employees, down from 250 in 1994.

Wright also steered away from trying to line up investors for a chain of mega-sized Cinetropolis entertainment centers at a cost of $12 million to $18 million each. Instead, he entered joint-venture agreements to open much smaller entertainment sites at $500,000 to $2 million each.

In recent months, Iwerks and its partners struck deals to open entertainment centers in San Bernardino County; Philadelphia; New York, at the former Studio 54 nightclub; and in Melbourne, Australia. The company is planning to open its own entertainment site in Burbank in November.

Iwerks gets a percentage of the ticket sales from these deals, and it picks up a ready customer for its new ride software shows.

One of Iwerks' latest efforts is a five-minute film in which the theater seats rumble and viewers go through an adventure in the Jurassic Period as they try to save dinosaurs before a volcano drowns an island in lava. The average ticket costs $5. Iwerks tries to get theaters to lease a new Iwerks "ride" every three months.

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Such moves helped standardize Iwerks' film and software projects, cutting some engineering costs. Wright also wanted to concentrate on resupplying material to Iwerks' existing 45 giant-screen theater customers and 130 ride-simulation centers.

"He refocused the product line and pulled costs out of the product by reducing the head count. And he refocused the staff on more realistic sales," said analyst John Taylor of Arcadia Investment Corp. in Portland, Ore.

Iwerks was founded in 1986 by two former Walt Disney Co. executives, and for a while the company's rides and big-screen films--which compete with the larger Imax Corp.'s films--made it a hot stock. But Iwerks lost its way by positioning itself more as a technology company rather than as a supplier of entertainment content, Taylor says.

While Taylor applauds the improvements made under Wright's watch, he worries about increasing competition from other entertainment centers springing up in shopping malls and the fickle attention span of theatergoers.

"The jury is still out" on Iwerks' longer-term prospects, Taylor said.

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