Disney’s Roller Coaster Ride

May 16, 2005  •  Post A Comment

Last week proved to be one of highs and lows for The Walt Disney Co. The media giant reported a 30 percent surge in fiscal second-quarter profit just as a pair of dissident shareholders fired their latest salvo at the company.

Former Disney board members Roy Disney and Stanley Gold last Monday filed a lawsuit against Disney and its board alleging that the board misled investors about the process involved in choosing Disney President and Chief Operating Officer Robert Iger as CEO.

The suit, filed in the Delaware Chancery Court, asks the court to invalidate the 2005 election of Disney’s board and to order the company to hold another election for directors after the board provides full and fair disclosure of the process by which it selected Mr. Iger to replace outgoing CEO Michael Eisner this October.

Mr. Disney and Mr. Gold have been critical of the process by which Mr. Iger was selected earlier this year to replace Mr. Eisner, and they lay out their concerns in the lawsuit, pointing to reports that the board interviewed only one external candidate, reportedly eBay CEO Meg Whitman, and reports that Mr. Eisner was present or expected to be present at interviews of external candidates.

Mr. Iger blasted the lawsuit.

“We believe that the complaint is completely without any basis,” he said during a conference call to discuss the company’s fiscal second-quarter results. He added, “I will not allow myself to be distracted” from achieving the company’s goals.

Meanwhile, the company reported that ABC is on track to be profitable in the fiscal year ending Sept. 30, driven by improved ratings and higher advertising revenue thanks to hit series such as “Desperate Housewives” and “Lost.”

Disney’s profit jumped 30 percent for the three-month period ended March 31 to $698 million, compared with a year-ago figure of $537 million. Revenue climbed 9 percent to $7.8 billion, with all divisions reporting revenue growth during the quarter.

The company’s media networks division, which includes cable channels ESPN and Disney Channel as well as broadcast network ABC, reported a 6 percent rise in revenue to $3 billion, while operating income rose 3 percent to $725 million.