Jim Hill 11/20: " Is Eisner...looking to sell the Walt Disney Company outright"

[Darkbeer]

Look, I couldn't post the full quote, so, yes, I did edit it to get your attention!... But let's look at the latest Jim Hill article from November 20th, titled "Why Disney Really Gave Up the "Ghosts" (By the way, this is a long and very interesting read and highly recommend you read the entire article.) But the point of this thread is to focus on this part of the article (of course you can start other threads dealing with things like the animation department).

http://www.jimhillmedia.com/main/index.htm

Which brings us to the bigger question: With Disney shutting down its Feature Animation operations in both Paris and Orlando as well as its Television Animation unit in Japan, and coupled with the Mouse's decision to sell off its Disney Stores retail chain ... what's really going on here?

So I asked a Wall Street analyst (one of those very folks that Michael Eisner is so desperate to please these days, rather than focus on pleasing the Disney Company's customers and/or cast members) to take a closer look at the situation. After agreeing that I would not reveal his name to JHM readers, he offered this analysis:

Were you to strip the Disney name off of this company, it would be fairly obvious what's going on here. Jim. Shutting down or downsizing somewhat redundant divisions. Selling off unprofitable operations. This is what a major corporation always does when it's trying to look more attractive to outsiders.

So I have to wonder: Is Eisner looking to redeem his now somewhat toxic reputation with Wall Street insiders by trying to merge the Mouse with some other media giant? Or is he just looking to sell the Walt Disney Company outright to the highest bidder?

Kind of scary to think about, isn't it? That pulling the plug on "A Few Good Ghosts" and the potential closure of the Walt Disney Feature Animation studio at the Disney-MGM Studio theme park in Orlando, FL may actually be indicators of bigger things to come. Like the whole Walt Disney Company supposedly going up for sale.

Make you think, doesn't it? Me? It just makes me mad. Just thinking about all the animators and artists in Orlando who poured their hearts and souls into "A Few Good Ghosts." Never realizing that they were just being strung along by a bunch of suits in Burbank. Who only saw the Florida studio as yet another pawn in Michael Eisner's never-ending game of corporate chess.

So, what is next, The LA Times/KTLA/Tribune Disneyland parks????earseek

[Instidude]

Were you to strip the Disney name off of this company, it would be fairly obvious what's going on here. Jim. Shutting down or downsizing somewhat redundant divisions. Selling off unprofitable operations. This is what a major corporation always does when it's trying to look more attractive to outsiders.

This is also the same thing that companies are doing now throughout the country to look more attractive to "outside stockholders". The days of the 80's where companies bought out other companies to make themselves bigger and better are over. The thought of decentralizing the coproate structure is over (the thought was to not have one single location do things, but do that work in several areas around the world, to bem more flexible). Almost all major companies have changed this methodology.

Now it becomes the motto of "Centralize all operations to minimize costs", "reduce headcount", "remove poor performing units or divisions", "redundancy is costly".

It is the only way that in these current economic conditions companies can continue to grow profits while earnings are flat. Yes, it is being done solely to appease investors, to make the company look good to shareholders and potential shareholders. The current managemnt at Disney (Eisner, the Board of Directors, etc), have been promising 10% growth. If the revenue stream sin't there to grow it, you reduce costs.

[Brian Noble]

Instidude: there are recent counterexamples. To wit:

HP's (foolish, IMO) purchase of Compaq
NBC's purchase of Vivendi's entertainment units (remains to be seen)

The reality is that *any* public company is always "for sale". True, executives can make the company more or less attractive. Interestingly, the things that make a company more attractive for acquisition also often make a company more attractive for investors---both camps look for companies with strong potential for future income/growth.

However, even if the people in the boardroom change (and perhaps the name on the boardroom door) there is positively zero chance of ditching the Disney "brand" in the parks---it is the most recognized, premium brand in the business.

[Nemo88]

Disney over-bought in the 90s,why does it surprise Jim that in times of need that Disney will sell off some of these things?

I think Disneys trigger-happy "buying" finger of the 90s is why its at where its at today.

Disney bought ALOT when the economy was good and booming,actually put the company in some debt....so now Eisner is lookin to consolidate everything,get rid of the frills.

I dont see anything alarming or odd about it,this is how businesses operate.

[Nemo88]

The reality is that *any* public company is always "for sale".


if I was Disney,Id buy out Pixar,it would solve the negotiations problems they have with Pixar every few years and what better way to look good to investers then to buy Pixar.

If I was Eisner that is what id do. (if i was looking to buy/merge with another company)

[dlport]

The article had some fairly substantial intellectual inconsistencies, primarily the supposition that the company may be for sale or interested in a merger. The factual instances presented as the reasoning for the conclusion simply do not support the conclusion itself.


It is an interesting theory, and perhaps with some more digging and more examples it could have made a convincing argument. Right now it just looks like a Kevin Yee article in that it draws conclusions without proper support. Strange, because usually Jim is a better writer than this.

[Nemo88]

^ I have to agree.

Disney is selling off aspects of its company that isnt performing,or aspects that the company can "do without" like the Disney Stores.

I dont see how that in any way equates Disney as a whole being up for sale or trying to merge.

To me,it shows a company trying to cut costs cuz it over-bought in the 90s.

[Marcie]

I respect Jim Hill's viewpoints, but on this one he is perhaps the most out of touch with reality regarding this topic.

For one thing it isn't up to Michael Eisner if the company can be sold outright or not. It is up to the entire board and there are a few on the board who are very powerful that would never go for selling off the company to an outside company or investment group.

The Disney Stores concept was great while it last and the division is no longer as succcessful as it once was. Basically the company has completely mismanaged the product line in the stores over the past 5 years, so the store profits are down. No one wants to buy the stores, at least no one has come forward as a potential suitor. The likely choice that has been kicked around is completely closing the stores altogether.

As for downsizing animation units, it is interesting that the TV animation unit is actually kicking butt and is growing in size. Feature Animation is going through another renaissance of sorts and will come out of the current slump with either jumping onboard with the new animation styles of the future or they will go down completely. I personally see the former scenario the more likely situation for Feature Animation as the company has already begun aggressive efforts in embracing CGI animation and not just through their Pixar relationship either. That may mean the closure or downsizing of the Florida Animation unit, but that doesn't mean the company is abandoning their place in animation. This happened in the late 1980's as well when the animation unit was at its smallest ever.

When a company goes through a period of negative growth in revenue or slower growth as in the case of Disney, the executives typically look at shedding non-core business units that no longer are contributing to the bottom line or do not fit the long term goals. Besides, Disney is beginning to see positive growth signs in revenue with the economy continuing to grow, the future looks pretty bright for the company.

This is a completely silly notion that Eisner is preparing the company for a possible sale to an outsider.

That is just sensationalism in reporting.

[Nemo88]

Thanks for clearing it up Marcie.

[Instidude]

Instidude: there are recent counterexamples. To wit:

HP's (foolish, IMO) purchase of Compaq
NBC's purchase of Vivendi's entertainment units (remains to be seen)

GE, who owns NBC, was looking at potentially selling off NBC before they bought VUE. That's beacuse the choice was being looked at by GE as: a) the network is not as dominant as it was and may loose some money-making muscle (GE as a company has goals to be #1 or #2 in any business it's in, or it will drop that business), or b) what do we do to our NBC unit to make it more profitable in the long-term. They went with b). But, if it doesn't perform well, I expect that GE would jettison their entertainment division in a second.

As a matter of fact, GE just announced that they were going to take their GE Capital unit and send it off on its own (returns must be down at this point, so its not worth their effort anymore, ORr they can make more money by letting it free during an IPO)