"Should Disney still be a Dow 30 Stock?" (Not under Eisner who inspired a boycott)

NEW YORK (CBS.MW) - Has the time come to boot Walt Disney out of the Dow Jones Industrial Average?

Disney (DIS: news, chart, profile) joined the world's most famous stock-market index on May 6, 1991 (replacing USX Corp.). But since then, the Mickey Mouse company's reputation has declined. In fact, Disney has seemed downright goofy at times.

True, Disney controls a bushel of prime global assets. These include its theme parks around the world, such television networks as ESPN and ABC as well as the many Disney film studios along with its Miramax unit. (Psst. Disney once had a thriving retail-sales business, but it has been a mess).

Clearly, Disney has the brand-power to remain a worthy representative of the U.S. media and entertainment industry. But is Disney still the best one?

Disney's most glaring shortcoming can be seen in the stock market. When it comes to feeling frustration, Disney shareholders don't know where to begin.

Since the end of April 1991 - the duration of Disney's reign in the Dow 30 -- the Dow Jones Industrial Average has risen 197 percent while Disney has only gained 78 percent. [Disney's shares tumbled 90 cents, or 5 percent, to $16.83 on Thursday amid the Dow's 230-point plunge].

Over narrower time frames, Disney's performance has lagged the Dow, too. The company's shares dropped 37 percent in the past five years, 38 percent over three years and 18 percent since the end of last year. By comparison, the Dow rose 4 percent in five years, fell 19.5 percent in three years and has declined 14 percent so far this year.

On Thursday, Disney reported fiscal third-quarter earnings in line with Wall Street's projections, but lowered its estimates for the fourth quarter. Disney Chief Financial Officer Tom Staggs said the theme park business is slowing as bookings so far in the fourth quarter have dropped 10 percent over last year.

The criteria for a stock to be included in the Dow 30 are "very general and subjective in nature," said John Prestbo, editor of Dow Jones Indexes.

Prestbo said he and Wall Street Journal Managing Editor Paul Steiger seek to include "large companies which have a substantial record of growth and success and a wide investment following and are leaders in their field."

Prestbo added that the companies included in the index don't necessarily have to have uninterrupted records of success. He added that he and Steiger have "nothing on our calendars" to discuss changing the Dow.

Disney's strategy of extending its brand in the television industry has not been a booming success. Its ballyhooed acquisition of Capital Cities/ABC back in the mid-1990s has had - to be charitable - mixed results.

ESPN, overlooked as an asset at the time, has emerged as the jewel of the deal. Disney has benefited from ESPN's role in a period of global growth of American sports. ESPN has led the way in coverage of baseball, football and ice hockey and the National Basketball Association is next.

Disney appreciates ESPN. Disney last February held its annual stockholder meeting in Hartford, Conn., only a javelin throw across the state from ESPN's headquarters in Bristol, as a tribute to ESPN's success.

On the other hand, ABC has recently been a disaster, symbolized by its haughty strategy of showing the erstwhile hit "Who Wants to Be a Millionaire" four times a week in prime time. That terrible idea effectively stripped the once-lucrative property - the pioneer in the reality TV boom -- of its cachet. In the past few years, you could count the number of hit ABC shows on one hand.

Disney's corporate image has taken hits in recent years, too. Disney looked ridiculous a few years ago when splashy headlines greeted its hiring of Hollywood super-agent Michael Ovitz as its president. He barely stayed long enough to see if his key could fit into the executive washroom.

Ovitz isn't even the angriest ex-Disney executive. Check the bile-infested transcripts of the legal wrangling between Jeffrey Katzenberg and Disney. Katzenberg was the Eisner confidante who bolted after he was turned down for the No. 2 job.

Katzenberg may have the last laugh yet as the company he co-founded, Dreamworks (with Hollywood fixtures Steven Spielberg and David Geffen), has begun to be recognized as Disney's equal (at the very least) in the animation field once owned by the older studio.

Eisner gets much of the blame for Disney's problems. His compensation dropped to $1 million last year from $12.3 million in 2000, as he didn't get a bonus and failed to exercise any stock options, according to documents filed with the Securities and Exchange Commission.

Disney chopped 4,000 jobs and had a net loss of $158 million in fiscal 2001, in the wake of its write-offs from closing its Go.com Internet portal, not to mention the economy's drag on its theme park business and the advertising slowdown's effect on ABC.

Eisner has attracted attention as one of the most highly paid executives in modern times. He reaped $576 million in 1997, most of it coming from his move to exercise $569.8 million in stock options.

The Los Angeles Times pointed out that Eisner's cash compensation in 2000 grew to $12.3 million (from $750,000) "in a year when Disney's net income fell 29 percent."

"Eisner hasn't delivered the goods and he shouldn't be taking that much money," said Joseph Bartel, chief market strategist at Fahnestock & Co.

"Disney was always associated with the family concept and it got away from its knitting and it alienated the public," Bartel said.

Many market observers say Disney is still the right choice to fit into the Dow 30, even though the company has lost some of its glow.

"Disney may not be the largest media company when you compare it in size to AOL Time Warner (AOL: news, chart, profile) and Viacom (VIAB: news, chart, profile)," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum. "But not every company in the Dow is the largest in its industry."

"Disney is still representative of the media sector to me," Hyman said. "The media business is an important part of the global economy."

AOL, the largest media company, may seem like a more representative choice, but the cloud of its accounting problems hangs over the company and the stock. The Justice Dept. and the SEC are investigating AOL's accounting, the company has conceded in recent weeks. AOL's stock has fallen more than 70 percent in the past year.

"Thank God, AOL wasn't added when the Dow was re-jiggered," Hyman said. "The Dow would be 400-to-600 points lower."

Analysts said another possible replacement for Disney could be media power Viacom, a significant investor in MarketWatch.com, the publisher of this report.

Hyman speculated that the most vulnerable Dow components could be AT&T (T: news, chart, profile) and Eastman Kodak (EK: news, chart, profile), whose performances have been rotten.

Then again, the prestige of the Dow, like that of Disney, has slipped a notch or two itself.

"The Dow only covers a small portion of the stock market and it is not as representative as it once was," Hyman said. "I don't use it as my benchmark - I use the Standard & Poor's 500."

They say the boycott had nothing to do with Disney's doldrums - - - maybe the FORMAL boycott didn't, but obviously people have been INFORMALLY boycotting the company's substandard (and often trashy) output because it's just not worth patronizing. I wish Walt HAD been frozen so he could come back and give Eisner a kick out the door.

"Disney was always associated with the family concept and it got away from its knitting and it alienated the public," Bartel said. ""

That's putting it mildly. The company that brought us DeGeneres, Priest, Nothing Sacred, and,frankly, all the raunchy crap on Spin City and Drew Carey isn't the same company that "was always associated with the family concept." No wonder nobody watches.

me and mine do not do Disney anything
when that first run alladin video was
sexually vulger,we were done with the godless Disney

Disney who? Used to be a decent company with a similar name but they were consumed by the wave of homosexual perversion, never to be seen again.

That's what happens when dirt balls like Eisner take over. Roy Disney through up his hands and goes sailing. Once walt Disney was out of the picture the money grubbers couldn't wait to get their hands on Disney.

Us too. Disney wonders why business is down. I'll tell them:

The theme parks are overrun by sexual perverts seeking to molest our children
The movies are mostly pornography
The broadcast network is run by commies and democrats
The retail operation has no merchandise worth buying and what they do have is overpriced
They are one of the ten most SAD friendly companies in the US

And they wonder why normal people avoid them like the plague

God Save America (Please)

I agree with all above. The last hold Disney has on this country is parents who can't say 'no' to their own children.

My brothers and sisters who are otherwise conservative return again and again to Disneyworld with their families despite my touting the leftward leanings of the Evil Empire. Peer pressure is a mindless, frightening thing.

Reuters Market News, August 2

S&P may cut Walt Disney rating as tourism slumps

NEW YORK, Aug 2 (Reuters) - Standard & Poor's on Friday warned it may downgrade Walt Disney Co.'s (NYSE:DIS - News) long-term credit rating, one day after the media entertainment giant warned its fourth-quarter profit may fall because fewer tourists are visiting its theme parks.

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