DreamWorks Animation Profit Slides 72% on Shrinking Holiday DVD Purchases

DreamWorks Animation SKG Inc. (DWA), maker of the “Kung Fu Panda” films, said fourth-quarter profit tumbled 72 percent, reflecting lower DVD sales.

Net income fell to $24.3 million, or 29 cents a share, from $85.2 million, or 99 cents, a year earlier, the Glendale, California-based company said today in a statement. Analysts projected profit of 31 cents excluding items, the average of 13 estimates compiled by Bloomberg.

“Kung Fu Panda 2,” one of two films DreamWorks Animation released in 2011, reached the home-video market in mid-December. Michael Pachter, an analyst at Wedbush Securities in Los Angeles, cut his profit estimate in a Feb. 24 note, citing weak holiday demand for DVDs. This month, DreamWorks Animation announced plans to develop entertainment products in China.

“The overall home-entertainment environment remains challenging,” Chief Executive Officer Jeffrey Katzenberg said on a conference call. Consumer purchases of digital copies of movies remain “modest,” he said.

Fourth-quarter sales declined 21 percent to $219 million from $275.7 million a year earlier, beating analysts’ projections of $205.1 million.

DreamWorks Animation plans to announce new distribution arrangements for its films by midyear or later, Katzenberg said. Viacom Inc.’s Paramount Pictures distributes its movies under a deal that expires at the end of this year.

“We are looking at this as a major strategic opportunity for us,” Katzenberg said. “We think there are a number of different options. We want to explore all of them.”

DreamWorks Animation fell as much as 8.7 percent to $17.95 in extended trading. The shares rose 2.1 percent to $19.65 at the close in New York and have gained 18 percent this year.

To contact the reporter on this story: Michael White in Los Angeles at mwhite8@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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