DISNEY ENACTS HIRING FREEZE; OVERTIME RESTRICTED, OTHER STEPS TAKEN TO HIKE PROFITS, BOOST LAGGING STOCK PRICE, SOURCES SAY.

Byline: Dave McNary Daily News Staff Writer

The Walt Disney Co., amid continuing pressure from Wall Street to boost its lagging stock price, has instituted a hiring freeze across the corporation, sources said Friday.

The Burbank-based entertainment giant refused to comment on reports that all Disney divisions have been instructed by corporate headquarters in Burbank to refrain from filling vacancies and making additional hires. Disney, which has annual revenues of $25 billion, had 117,000 employees as of last September.

Sources also indicated Disney executives, while not having been ordered to start layoffs, have tightened requirements on use of temporary workers and overtime. The Hollywood Reporter, citing unnamed sources, said Friday that the freeze may be lifted in a few cases to fill slots of departing staffers, important executives and ``significant talent.''

Disney Chief Executive Michael Eisner ordered a cost-savings review in late April after Disney reported a 30 percent drop in profits for its second quarter ended March 31 but was vague as to what steps would be taken.

``We intend to make our businesses more efficient, increase our cash flow and position ourselves to better capitalize on the long-term growth potential of our brands,'' he said at the time.

Since that time, Disney stock has fallen 11 percent and closed down 50 cents Friday at $28.875. The issue is down 32 percent from its all-time high in May 1998 while rivals Time Warner, Seagram and Viacom have posted healthy gains.

Disney stock has declined as analysts have cut earnings estimates over a wide variety of concerns: Weakness in merchandising and home video; ongoing problems at ABC television; competition from Universal Studios' Islands of Adventure in Orlando, Fla.; and concerns over Internet strategy.

The issue topped $38 in January on bullishness over Disney's Infoseek partnership but the recent announcement of plans to buy the rest of Infoseek generated little enthusiasm. Analysts have been troubled by this week's departure of Disney's top Internet executive.

``Disney's culture is antithetical to the Internet, which is sort of a cowboy culture,'' said Forrester Research analyst Joseph Butt Jr. ``The perception is that pure-play Internet companies are much more nimble and focused. The Web, frankly, is an area that the rest of Disney doesn't really understand.''

The stock price decline is embarrassing for Eisner since he was America's best paid chief executive last year due to his decision to cash in more than $500 million in stock options. Eisner's reputation has also been hurt by his refusal to settle the high-profile lawsuit filed by former Disney studio chief Jeffrey Katzenberg over Disney's alleged failure to pay $580 million in bonuses.

Barry Hyman, an analyst with Ehrenkrantz King Nussbaum, said, ``The hiring freeze was not surprising. There's always going to be tremendous pressure on any major blue chip company that's not performing, especially with Eisner receiving such tremendous payouts.''

Hyman noted that Burbank-based Disney already carries a reputation for paying employees less than rivals, so it may be forced to take more drastic steps, particularly with the ABC network, beset by soaring programming costs and unimpressive ratings in its three years under Disney's wing. ABC instituted a hiring freeze last month.

``The recent rumor that was going around was that they were going to spin off ABC,'' Hyman said. ``They have to get the stock moving again, so the logical place to start would be ABC.''

Ultimately, Hyman said, the answer might be consolidation or coordination with the other networks with some sort of relaxation of Federal Communication Commission rules against such links.