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Disney's Eisner: "We Are the Most Profitable"

Walt Disney CEO Michael Eisner invoked the ghost of Mickey Mouse's creator to get in a dig at Time Warner, his longstanding rival, when he met with analysts and investors on Feb. 6 in Anaheim, Calif., to talk about the company's outlook. Ghoulish? Perhaps, but Eisner envisioned Uncle Walt coming back from the grave to chastise him for the potential sin of giving away 65% of his company to merge with a dot-com startup. "[Disney] would say, 'You gave away 65% of my company for Yahoo!?'" Eisner deadpanned for the crowd. Of course, the current Disney CEO doesn't really fear being haunted by his predecessor -- "we all know he's frozen."

The barb aimed at Time Warner, which swapped 65% of its equity to America Online in the recently closed deal, was among the highlights of a daylong meeting. In spirited give-and-take, Eisner insisted that Disney is still "in the acquisition business." It's just that he isn't going to go on a buying spree just for the sake of getting bigger. "We're not going to make acquisitions to make journalists' headlines or to make bankers wealthy," Eisner declared.

He brushed off recent news accounts that portrayed Disney as a niche player, since media companies like Viacom and Time Warner have beefed up through mergers and acquisitions. Indeed, deals, potential deals, and the closing of Disney's portal were topics that seemed to dominate Eisner's banter with analysts and investors. Here are edited excerpts from the lively conversation:

On closing We were enthusiastic, competitive, and we didn't want to spend for someone else's portal. But don't believe press reports that we lost $1 billion on that investment. We lost $150 million. And for that $150 million, we got the half of and that we didn't already own. People forget that the other half of those companies were owned by [Paul Allen's] Starwave. I'd be happy to make the argument that we got the other half of those two companies for just $150 million. Of course, I'd wait 10 years before making that argument.

On rumors of Disney buying Yahoo!: It's a great company. It is just too expensive. It's certainly too expensive at $125 billion. Maybe it would be too expensive at $50 billion, maybe even at $25 billion. But it is a great company.

On the AOL-Time Warner deal: Do I feel envious sometimes because they're the darlings right now? Maybe, but I know I wouldn't have given away 65% of my company to make that deal. They may have been right, maybe AOL really is important for distribution, but not at that cost. Maybe we'll make a deal with AOL. Maybe we'll let them put on their front page. They should be so lucky.

On whether the animated-film business is still a growth area: Yes. [Studio Chief Peter Schneider] is getting costs down by 10%. Animators are making less. We are using fewer man-hours to make each film, so the films are getting cheaper. With so many animated films out there recently, an annual film maybe wasn't that unique to the audience. But we are the only one out there doing animated films in 2-D now, although maybe Nickelodeon is. And in 3-D, it is only Pixar and us, and maybe one or two others. Everyone jumped in a few years ago, after we made Lion King. Now they're leaving. We're still here.

On buying more TV stations: We have room to buy some. The federal rules allow us to buy [stations that beam to] up to 35% of the country. [Disney is at 25%.] It all depends on what the stations are and what they cost. We don't want to make a deal and spend the next 12 years trying to justify the purchase. We also might be interested in more radio stations. We're also interested in duopolies [buying the second TV or radio station in a market where Disney already owns one], because of the efficiencies. But a lot depends on price.

On fears that Disney is becoming a niche player: I don't think that's true. It was just five years ago that we bought ABC. That made us No. 1 for seven minutes, now we're No. 2 or No. 3. But we are the most profitable. I don't see any pressure on us to make deals just to get bigger. The only deals we're going to make are those that make our earnings and share price bigger. By Ronald Grover in Anaheim

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