DISNEY'S PROFITS BEAT EXPECTATIONS ENTERTAINMENT GIANT HAD BOX OFFICE SUCCESS.

Byline: GREG HERNANDEZ

Staff Writer

BURBANK -- The Walt Disney Co. managed to beat Wall Street estimates with a 27 percent jump in profit but fell short of revenue expectations in the second-quarter earnings it reported on Tuesday.

Disney, owner of a film studio, theme parks and the ABC broadcast network, enjoyed major success at the box office with "Wild Hogs" and on the small screen with such hits as "Desperate Housewives," "Dancing With the Stars" and "Grey's Anatomy."

The media and entertainment conglomerate posted net income of $931 million, or 44 cents per share, compared with $733 million, or 37 cents per share, in the second quarter of 2006.

Revenue grew only slightly to $8.07 billion from $8.03 billion for the quarter ended March 31.

"We're pleased with this quarter's excellent performance," Disney Chief Financial Officer Thomas Staggs told analysts during a conference call. "It's gratifying to report on the continued broad-based success."

Disney's Media Networks, which include ABC, ESPN, ABC Family and domestic and international Disney Channels, had revenue of $3.56 billion, just up from $3.55 billion a year ago. Revenue from cable networks grew by 7 percent but broadcasting revenue cancelled that out with a 7 percent drop.

The company blamed the fall in broadcast revenue on the absence of the Super Bowl, three fewer College Bowl games and fewer hours of other sports programming on ABC.

Disney's parks and resorts division, which includes Disneyland Resort in Anaheim, Walt Disney World Resort in Orlando, Fla. and international parks in Paris and Hong Kong, saw revenue climb by 9 percent to $2.45 billion.

Also up was revenue from Disney's consumer products division, which was $516 million, a 14 percent increase.

Disney's studio entertainment division, which includes theatrical films and home video, saw its revenue drop by 12 percent to $1.55 billion because of a robust 2006 second quarter that had more releases as well as the international box office success of "The Chronicles of Narnia: The Lion, the Witch and the Wardrobe" and "Chicken Little."

But the division's revenue drop was balanced by a 60 percent increase in profit due to cost containment.

While its two projected 2007 blockbusters "Pirates of the Caribbean: At World's End" and the Pixar Animation Studios title "Ratatouille" have yet to be released, the film division's second quarter was boosted by the surprisingly strong domestic box office performance of "Wild Hogs" ($160.1 million) and the lesser hits "Meet the Robinsons" ($92 million) and "Bridge to Terabithia" ($81.2 million).

Since "Robinsons" failed to reach the $200 million-plus domestic total of a typical Pixar title, Iger was asked if the gross for the film reflected poorly upon the merging last year of Pixar with the existing Disney animation.

"'Meet the Robinsons' was already pretty much completed," said Disney's Chief Executive Officer Robert Iger who added that "it wouldn't be fair to judge the Pixar influence over Disney animation" until the summer 2008 release of "American Dog," the next non-Pixar animated offering.

Iger also reiterated faith in the company's decision to release some of its DVDs in Blu-ray technology instead of the rival next generation format HD-DVD.

"Blu-ray discs are outpacing HD-DVD discs by at least 2-1," he said. "The best thing that could happen is for the format war to end."

Shares of Disney stock closed at $36.55 per share on the New York Stock Exchange. In after hours trading, shares were down 1.3 percent at $36.07.

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