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Disney's Profit Drops 24% in Fiscal 4th Quarter

November 04, 1998| From Bloomberg News

Walt Disney Co. said Tuesday that its fiscal fourth-quarter profit fell 24% because of weak films such as "Holy Man" and "Beloved," soft video sales overseas and higher costs at its ABC television network.

Profit at the world's second-largest entertainment company fell to $296 million, or 14 cents a share, from pro forma profit of $390 million, or 19 cents, a year ago. The results for the quarter ended Sept. 30 include pretax charges of $64 million, or 2 cents a share, to consolidate film units and to scale back its consumer products divisions.

In September, Disney warned that its fourth-quarter earnings would be soft. The results were in line with its projection that earnings would fall to between 15 cents and 16 cents a share before the 2-cent charge.

Operating profit for Disney's film and TV production unit fell for the third quarter in a row amid weaker international sales of home videos and higher costs to produce and market its movies. Disney's third-ranked ABC network also struggled with rising costs and lower ratings, and its consumer products unit faced weak demand in Asia. That, along with higher investment costs, may slow its growth for the next couple of quarters.

Revenue for the quarter rose 13%, to $6.15 billion from $5.43 billion.

Chairman Michael Eisner has been aggressively expanding Disney, using its well-known brands such as ESPN and the Disney name to create new products, such as the ESPN Zone restaurants and DisneyQuest, an interactive entertainment site at Walt Disney World in Florida. The company also has been pushing to enter new markets, such as the cruise ship business.

While that growth is expected to pay off with new revenue streams and an improvement in Disney's stock price, the company now is bearing the brunt of start-up costs.

Eisner said 1998 is a year for investments that "will be important contributors to Disney's long-term growth."

Shares of Burbank-based Disney rose 75 cents to close at $29.56 on the New York Stock Exchange. The company's results were released after the market closed. After tumbling as low as $22.50 in October, Disney's stock has started to climb again, although it remains far below its 52-week high of $42.75 reached in the spring.

Times staff writer James Bates contributed to this report.

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