Analyst holds to negative call despite rise in Disney's stock.

RICHARD Greenfield must be feeling a bit lonely by now.

Back in July, the Fulcrum Global Partners analyst issued a "sell" rating on Walt Disney Co. stock. Since then, Disney shares have reversed a two-year slide, gaining 26 percent to set a new 52-week high of $24.96 on Jan. 8.

The gains have been driven by an earnings comeback at the Burbank-based media giant, which reported net income of $1.3 billion for the year ended Sept. 30, 2003, compared with $1.2 billion a year earlier. Revenues rose 6 percent, to $27.1 billion, while the key industry measure of operating income grew 12 percent, to $3.2 billion.

"I firmly believe that the performance turnaround at our company is now under way," declared Chairman and Chief Executive Michael Eisner during a Smith Barney presentation to analysts on Jan. 6.

Last month, Chief Financial Officer Thomas O. Staggs projected a 30 percent rise in the current fiscal year, which ends in September. Last week, Schwab Soundview analyst Jordan Rohan raised his earnings estimates on Disney for the current year. Greenfield, though, is holding fast. His New York-based firm, which caters to hedge funds and other institutional investors who may place "short sales" betting a stock goes down, sets itself apart from typical Wall Street brokers. "We provide high-impact research product that is flexible and tailored to the needs of these communities," the company says on its Web site.

Greenfield declined to discuss his Disney call, but, through his assistant, he told the Business Journal he stands by reports issued in July and October that question whether Disney can maintain its earnings momentum.

In October, Greenfield questioned whether Disney could continue the success of box office blockbusters such as "Pirates of the Caribbean." He pointed out that Disney hasn't yet wrangled a new production deal with Pixar Animation Studios, which was responsible for big hits such as "Finding Nemo," the year's top-grossing movie. Any new deal with Pixar will likely be less favorable to Disney, he said.

Another earnings driver has been ESPN, generating double-digit revenue and earnings growth thanks to hefty hikes in the fees it charges to cable operators. The fees are the highest charged in the business.

In the October report, Greenfield questioned whether ESPN could continue to wring higher rates from cable operators such as Cox Communications, whose increasing size gives it added clout in negotiations. Cox has gone public with its sometimes-nasty behind-the-scenes rows with the sports cable network.

"While we are intrigued by Disney's current earnings momentum, we increasingly believe the drivers of its earnings recovery are not sustainable," Greenfield wrote.

Disney spokesman John Spelich declined to comment specifically on either the Pixar negotiations or earnings. But he noted that the company's string of box-office hits has continued into this year thanks to the Civil War drama "Cold Mountain," and that Eisner is happy with its 2004 slate, which includes the historical drama "Alamo."

ESPN will be able to justify future fee increases with its ratings success as well as a growing slate of offerings, including a sports channel targeting the Hispanic market, he said.

"We have been saying that things would improve. They have and will continue," said Spelich.

Greenfield, for one, sees little in the way of long-term growth prospects.

His reports point out that net income remained "essentially flat" for the past seven years when goodwill--the write-down of intangibles from its 1996 acquisition of Capital Cities/ABC and other deals--is excluded. The company's $1.3 billion in net income for 2003 was boosted in part by a GAAP-mandated amortization adjustment in ESPN's contract with the NFL, which added $180 million to the bottom line.

A recovery for Disney's other operations, including Disneyland and its other theme parks, remains a question mark. Greenfield said that while the travel recession is ending, customer preferences for drive-to locations and competition-driven discounting on rides and hotel rates may hinder recovery.

Spelich said the company's long-term growth is simply inherent in its business model, pointing to the various synergies, including the recent home video releases of "Finding Nemo" and other hits. Greenfield concedes the releases will likely boost operating profits by $300 million.

"You have the movie library and other parts of the business and it all feeds into each other. No one can say we'll keep growing forever, but we have a chance to keep our growth going," Spelich said.

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Bank Departure

Less than three months after its $44 billion merger with FleetBoston Financial, Bank of America Corp. has named a replacement of Liam McGee, its longtime head of California operations.

Lynn Pike, 48, managing director of consumer banking and distribution for FleetBoston, has been appointed president of Bank of America California, the bank said last week. Pike will be responsible for the bank's 40,000 employees, 26 million customers and $200 billion in deposits in California.

Pike replaced McGee, who relocated to Charlotte, N.C. after being named to a newly created risk and control committee that reports directly to Kenneth D. Lewis, Bank of America's chairman and chief executive. As reported in the Business Journal, McGee, who was involved in extensive civic activities locally, had tried to negotiate a way to remain in Los Angeles.

Pike joined FleetBoston in 2002 and was executive vice president and regional president of Wells Fargo Bank's Los Angeles division for four years.

--Kate Berry