SEAGRAM TO USE PART OF FILM UNIT; POLYGRAM'S OVERSEAS OPERATIONS WILL STAY.

Byline: Dave McNary Daily News Staff Writer

Universal Studios announced Wednesday it will launch its own foreign movie distribution arm by using the international operations of PolyGram Filmed Entertainment.

The move means Seagram Co., Universal's parent, has decided to keep at least part of PFE rather than selling it. Seagram sold off the PFE film library in two deals totaling $400 million, but has not yet decided if it will sell PFE's domestic operations.

``After two months of extensive evaluation in determining the most amount of value PFE brings to Universal, we have concluded that retaining PolyGram's international operations provides the strongest strategic advantage,'' Ron Meyer, president of Universal Studios, said in a written statement.

The move underscores the increasing importance of foreign markets in the movie business. Foreign receipts amounted to $10.87 billion last year, or 60.8 percent of the worldwide box office. Baskerville Communications has forecast that figure will hit $15.37 billion, or 65.6 percent, by 2007.

PFE, which will retain its identity, distributes films directly in nine countries and uses its London office for sales in the rest of the world. Its top upcoming movies include ``Notting Hill'' with Julia Roberts, ``The Green Mile'' with Tom Hanks and ``Being John Malkovich'' with Cameron Diaz.

PFE's international president, Stewart Till, will continue to head the operation, which owns or has output deals with Working Title, Dirty Hands, DNA Pictures and Revolution Films. Additionally, Universal will continue to use UIP - its joint venture with Paramount and Metro-Goldwyn-Mayer - to distribute its own films overseas. The UIP agreement expires in October 2001.

Seagram, which acquired PFE last year as part of its $10.4 billion buyout of music giant PolyGram NV, is also expected to report quarterly earnings today with analysts forecasting profits of 2 cents per share for its second quarter ended Dec. 31, compared with 22 cents per share in the year-earlier period. The downturn is due to feeble box office performance by ``Meet Joe Black'' and ``Babe: Pig in the City.''

Seagram also announced in December that it would take a charge of as much as $700 million for the cost of integrating PolyGram's operations. Since then, 700 jobs have been cut at the combined music operations and another 1,500 slots could disappear by the time the restructuring is completed this summer.