Financial goals remain unchanged
Despite the weak economy and excluding the charges, Disney spokesman John Dreyer said financial goals remain unchanged. He said that barring a protracted economic downturn, Disney had expected long-term growth of 13 percent to 15 percent in earnings before interest, taxes, depreciation and amortisation (EBITDA), and it had forecast free cash flow for fiscal 2002, ending September 30, 2002, of $2 billion. Financial analysts believe Disney will earn 77 cents per share for its fiscal year 2001, ending Sept. 30, 2001, and 99 cents per share for fiscal 2002, according to investment research firm Thomson Financial/First Call. Dreyer said the company remains comfortable with those average forecasts. Reaction was positive from Wall Street analysts who see a net gain of $100 million to $150 million based on the difference between the action's cost and first-year savings. "I think Disney is being a little more proactive with this economic cycle, as opposed to the way they were in the 1991 recession," said Jeff Logsdonat Gerard, Klauer, Mattison. Disney shares closed at $29.20, up $1.28, or 4.58 percent, on the New York Stock Exchange on Tuesday, along with a broad rally that saw the Dow Jones Industrial Average climb 260.01. Disney's news announcement came after the market closed. The stock has fluctuated widely this past year, rising to a 52-week high of $43-3/4 last fall before dropping off amid a wider sell-off in media stocks due to the slowing ad market. Indeed, several media companies have unveiled layoffs in recent weeks including cable TV network CNBC, which last month announced a plan to cut four percent of its staff, and sister company NBC, which is laying off 5 to 10 percent of its staff.

Weakness in media, theme parks
One of the world's largest media companies, Disney's entertainment, travel and leisure assets include the film studio in Burbank that has cranked out animated hits like "The Lion King," this past summer's computer generated "Dinosaur" and live-action movies like the upcoming "Pearl Harbor." Along with broadcaster ABC and all-Sports cable TV network ESPN, the company owns the Disney Channel and has stakes in cable TV's A&E Television Network, the History Channel and Lifetime Television, among several channels. The weak US economy has already cut into advertising sales at the TV units, where political and dotcom spending, as well as huge ratings from the hit game show, "Who Wants to be a Millionaire," had boosted earnings last year.

Disney's current concern contrasts to November 2000 when it released fourth-quarter earnings reflecting ad weakness. At that time, Disney executives expected ad spending to pick up at the start of calendar 2001.

They also believed that doubts about a weak economy would fade. Those expectations have not been fulfilled. The crown jewel of its theme parks is the Walt Disney World resort in Florida, which links up to the two-ship Disney Cruise Line. It owns Disneyland in southern California, and has various interests overseas in Disneyland Paris, Tokyo Disneyland and the soon-to-open Tokyo Disney Sea, among others. Heading into the all-important summer season, continued economic softness could force travelers to trim their vacation plans, which would hurt the theme park business. Mr Logsdon said some weakness has already shown up in bookings for the spring and summer at the theme parks, yet the company's cruise line has not seen any slowdown. He noted that nearly two-thirds of the people coming to the California parks are local, while only about one-third of the Florida park visitors come from nearby towns and cities. Movies, generally, have a history of being recession resistant because they are inexpensiveentertainment for people who stay at home instead of traveling.

Reuters