DISNEY EKES OUT PROFITS CORPORATE BEHEMOTH, HURT BY ONLINE FAILURE, BARELY BEATS FORECASTS.

Byline: Jesse Hiestand Staff Writer

ANAHEIM - The Walt Disney Co. narrowly exceeded first-quarter earnings expectations Tuesday as mounting losses in its Internet ventures cut into stellar theme park and home video sales.

Earnings of the Burbank-based entertainment conglomerate were released at a meeting in the Grand Californian Hotel, a Craftsman-style lodge located inside the new California Adventure theme park, which will open Thursday.

Robert Iger, president and chief operating officer for Disney, said the company was confident the new park, as well as its existing operations, would fare well in spite of an economic slowdown.

``We're probably less vulnerable to a protracted recession than is generally acknowledged,'' said Iger, who noted that vacation bookings for late spring had tapered off. However, he said attendance at Disney theme parks reached record levels after each previous recessionary period.

While Iger suggested the company might expand through acquisitions, Chairman and Chief Executive Officer Michael Eisner downplayed the idea.

``We are basically a company who manages and builds from within. If the right thing becomes available that we can add value to . . . we will pounce,'' he said. ``We're really looking to be bigger and better in our earnings and cash flow.''

The company said its earnings were up 23 percent to $341 million on revenue of $7.3 billion, a 7 percent increase over a year ago. Counting a $253 million loss at Walt Disney Internet Group and newly adopted accounting changes, net income was $63 million, compared with $356 million last year.

That amounted to 16 cents per share. Analysts had expected 15 cents per share. Without the Internet losses, the company said it would have earned 28 cents per share.

Shares of Disney climbed $3.88 to close Tuesday at $31.61.

Executives announced that Disney plans to take a $790 million charge in the second quarter as it closes its Go.com portal. Disney hopes to improve its Internet business by focusing on brand names like Disney.com and ESPN.com, which are among the most popular sites on the Internet.

``We believe we are on course to be profitable in less than 18 months,'' said Steve Bornstein, chairman of Walt Disney Internet Group.

The California Adventure has already benefited from the Disney Vacations Web site, which has booked 4 million trips in the past two months, a 200 percent increase from the same period a year ago.

Several new Internet ventures are planned, including a ``My Sportscenter,'' where users with fast Internet connection can get customized highlights and sports news.

Consumer products continues to be a troubling area for Disney, with quarterly revenue dropping 6 percent to $825 million on slower sales at Disney Stores in North America during a weak holiday retail market.

Improvements already seen at two remodeled Disney Stores are leading the company to remodel an additional 25 this year. Disney still plans to close 100 stores over the next four years as leases expire.

Disney hopes to retain customers and boost sales through its Disney Club, which already has 300,000 subscribers paying $40 a year to get discounts and other incentives.

Chief Strategic Officer Peter Murphy also said Disney plans to launch its own co-branded credit business at the end of next year.

Disney's media division, including the ABC network, has been hit by the slowing economy's effect on advertising. Revenue grew 6 percent to $2.9 billion, yet operating income dropped 8 percent to $590 million on lower ratings and higher production costs. That was partially offset by the continued success of ``Who Wants to be a Millionaire'' and the strength of its cable TV business.

Film studio earnings rose 15 percent to $1.9 billion quarterly, boosting operating income to $152 million, compared with a loss last year of $45 million. This turnaround was driven by improved domestic film distribution and worldwide home video sales led by ``Toy Story 2.''

Disney said it has been successful in meeting its goal of making fewer films and keeping costs down.

Business continues to soar at the parks and resorts, which reported a second consecutive quarter of record results. Revenue was up 9 percent to $1.7 billion over last year, while operating income rose 6 percent to $385 million.

Increased guest spending and record attendance at Walt Disney World and Disneyland, plus continued growth of Disney's cruise line, were credited for the increase.