Calming The Crowd After Eisner's Thrill Ride

Robert Iger has been waiting a long time for this moment. On Oct. 1 he finally takes over as CEO of the beleaguered Walt Disney Co. (DIS ), six months after being selected to succeed embattled Michael D. Eisner. For many investors, executives, and board members, bringing an end to the stormy final years of Eisner's two-decade turn at the helm couldn't have happened soon enough. Now, with Eisner out of the way, it will be all Iger's show.

Is Iger, 53, up to the task of turning around a company that has become a 9-to-5 soap opera? After years filled with lawsuits and boardroom rebellion, Disney has already made some progress under Iger. Since being named on Mar. 13, Iger has patched up a yearlong battle with dissident former board members Roy Disney and Stanley Gold. What's more, Disney's long-suffering ABC network is enjoying a comeback, and ESPN is generating a tidy stream of cash.

But none of that is enough for Wall Street, which has dissed media stocks of late and focused on the company's movie-studio woes. Since Iger was tapped, Disney's share price is off some 15%. Iger knows he has a big sales job to do. Says Iger: "We have great, underappreciated brands."

Iger could be on the verge of overcoming one of the major hurdles toward winning back investors: signing a new deal with Steve Jobs' Pixar Animation, which made such blockbusters as Toy Story and The Incredibles for Disney. It won't come easy -- or cheap. But Disney insiders say Iger is making headway. While Eisner and Jobs dueled incessantly, Iger has enjoyed cordial phone calls and e-mail exchanges with Jobs. More important, Disney studio chief Richard W. Cook has been making frequent trips to Pixar's Emeryville (Calif.) headquarters.

A compromise might be reached by late this year, insiders say. It could have Pixar ending its 14-year 50-50 joint venture with Disney, with Pixar paying all production costs and giving Disney 6% of studio film revenue. Disney would hang onto the rights to older Pixar films, as Jobs wanted, and sign a long-term contract to sell Pixar merchandise. Neither Jobs nor Iger would comment on the talks. "The deal is complicated and has to make sense to two sets of shareholders," says Iger.

Even a Pixar deal won't solve all of Iger's problems. With the media industry in a slump, Disney suffers from advertising woes, a limp box office, weak DVD sales, and competition from the Net. Its lackluster summer will saddle the company with $300 million in losses next quarter.

Iger has a plan. He's spearheading a move to distribute Disney films and TV shows digitally on phones and directly to homes -- crucial for a company without cable or satellite operations. Disney is also thinking of selling some of its 71-station Radio Disney chain to focus on other assets.

For now, much of Wall Street remains unconvinced. But Capital Group's Gordon Crawford, a bellwether among media investors, has started to pay attention. Crawford once said he would never buy more Disney shares under Eisner. He isn't commenting, but Capital, which now owns 33.7 million Disney shares, has increased its stake by 15,000 shares in recent weeks. It's not a lot, but for Disney, the new era may start with mouse steps.

By Ronald Grover in Los Angeles

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