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Pixar ends partnership with Disney, giving new life to Eisner ouster bid

By James Bates
Los Angeles Times

	AP The Disney/Pixar film "Monsters, Inc." about a monster world is a scream for moviegoers.
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For weeks, Eisner appeared to have the upper hand over adversaries Roy Disney and Stanley Gold, former board members who were portrayed by the embattled CEO and his allies as disgruntled gadflies. Disney executives have been quietly making their case on Wall Street, citing the company's rising stock price and an upcoming strong earnings report as evidence that Eisner has turned things around.

But yesterday's shocker is being viewed as a boost to the campaign by Roy Disney, the nephew of company namesake Walt Disney, and Gold, Roy Disney's chief lieutenant. The two operate through Shamrock Holdings in Burbank, Calif.

"This will give Roy Disney and others some more ammunition, which is something they desperately seem to need," said investor Herbert Denton, president of Providence Capital in New York.

Some analysts believe Burbank-based Disney made the right call in rejecting Pixar's offer to keep the relationship going, because Disney would have had to give up a big piece of the profit to retain Pixar as an animation producer. The break-up nonetheless plays into one of Shamrock's key arguments: that Eisner has mishandled creative relationships with such figures as Pixar Chairman Steve Jobs and Miramax Chief Executive Harvey Weinstein.

Former board members Disney and Gold, who resigned late last year while calling for Eisner to step down, pounced on the demise of the Pixar-Disney partnership, saying it bolstered their contention that Eisner's actions ultimately would hurt future earnings even if today's profits are healthy. After a 13-year relationship, Pixar yesterday announced it would no longer try to negotiate a new contract with Disney and would look to other studios to distribute its animated movies.

"This just proves, sadly, that we were right," Roy Disney said in an interview.

The company had no comment on Roy Disney's remarks.

Earlier this week, Disney and Gold called on stockholders to withhold their votes from Eisner and three other directors in a protest over Eisner's management. The dissidents are expected to try to exploit the company's disclosure this week that Eisner received a $6.25 million stock bonus in a year when Disney's theme parks and ABC network continued to struggle.

In a statement yesterday, Roy Disney and Gold said they had warned Disney directors as long as a year ago that the relationship with Pixar was fragile, even after the animation firm "hit five grand slam home runs in five times at bat for Disney."

The Pixar animated hits released by Disney include "Toy Story," "A Bug's Life," "Toy Story 2," "Monsters Inc." and last year's box-office champion, "Finding Nemo." In recent years, Pixar's pictures have outperformed Disney's own animated films, once the driving force behind the company's earnings.

Ticket sales for Disney's own cartoon features have lagged, with "Treasure Planet" reducing profit in the 2002 fiscal year by $47 million. Eisner has relied on Pixar to generate as much as half the profit at his film division, an analyst said.

"This is another example of Michael Eisner dropping the ball," said Thomas Wyman, a fund manager at Husic Capital Management in San Francisco. "I think they got a little too rough with Steve Jobs in negotiation."

Husic manages about $700 million, including about 20,000 shares of Disney.

Analysts said they had hoped Disney and Pixar could work out a deal, and added that Disney needs to clearly explain the arguments supporting the decision. Investors reacted by battering Disney stock in after-hours trading, as shares slipped to $23.22 during after-hours trading after closing up 78 cents at $24.45 during the New York Stock Exchange's regular session.

Lowell Singer, a media analyst based in San Francisco for S.G. Cowen Securities said: "It's disappointing that Eisner and Jobs could not figure out a way to continue this relationship."

Information from Los Angeles Times staff writer Meg James and Bloomberg News is included in this report.

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