Disney reports higher income

(AP)
Updated: 2007-08-03 15:46

LOS ANGELES - Continued strong attendance at its domestic theme parks and brisk sales of video games and licensed merchandise helped boost profits for The Walt Disney Co. in the third quarter.

The Burbank-based media conglomerate also took a big step to bolster its Internet offerings for teens with the purchase of Club Penguin, an online entertainment site, the company said Wednesday.

Disney has stayed out of the hunt for such popular social networking sites as YouTube and MySpace, preferring to develop its own Disney.com site and virtual worlds featuring its wide variety of characters, including Tinkerbell and Capt. Jack Sparrow.

The purchase of Club Penguin for $350 million in cash, with the possibility of another $350 million if certain profit targets are met, will help speed those efforts, the company said.

The site, launched only two years ago by Canada's New Horizon Interactive Ltd., will begin delivering profit for Disney right away.

"Club Penguin has grown into a site that boasts more than 12 million activated users and 700,000 paying subscribers," Disney Chief Executive Robert Iger said in a conference call with analysts Wednesday. "Imagine how Disney's marketing skills and worldwide technological capabilities can contribute to Club Penguin's growth and you can see why we are so enthusiastic about this acquisition."

The announcement came the same day Disney reported strong third-quarter earnings.

The company reported net income for the three months ended June 30 of $1.18 billion, or 57 cents per share, compared with $1.13 billion, or 53 cents per share, in the same period last year.

Revenue climbed to $9.05 billion from $8.47 billion in the year-ago period.

Analysts surveyed by Thomson First Call had expected profit of 55 cents per share on revenue of about $9.02 billion.

The company saw double-digit growth in its theme parks, media networks and consumer products division in the quarter.

Despite the success of "Pirates of the Caribbean: At World's End," profits fell at Disney's film studio due to lower revenue from DVD sales.

Operating income at Disney's media networks division jumped 23 percent during the third quarter to $1.36 billion on the strength of subscription fees paid by cable companies for its ESPN channel and ad revenue at ABC, the company said.

The company's consumer products division delivered a 12 percent increase in operating income and a 23 percent rise in revenue from strong video game sales and continued growth in licensing revenue from items based on the animated film "Cars."

Operating profit at its parks and resorts division rose 13 percent on increased attendance and spending at Disneyland and Walt Disney World resorts.

Attendance at Walt Disney World in Florida increased 4 percent in the quarter and per-guest spending also rose, said Tom Staggs, Disney's chief financial officer.

Attendance at the Disneyland resort in California was flat for the quarter, but guest spending increased slightly, he said.

Disney's film studio saw operating income drop 20 percent in the quarter, despite a 4 percent rise in revenue.

Ticket sales from the latest "Pirates of the Caribbean" film were offset by marketing costs for its latest Pixar Animation Studios release, "Ratatouille," the company said. Disney also did not have any strong DVD release in the quarter, while last year's quarter included revenue from the sale of 18 million DVDs of "Chronicles of Narnia."

The company repurchased 55 million shares for $1.9 billion during the quarter.

For the first nine months of the year, Disney reported net income of $3.81 billion, or $1.81 per share, compared with $2.59 billion, or $1.28 per share, in the same period last year.

Revenue for the first nine months grew to $26.58 billion from $25.10 billion in last year's period.

The company released the financial results after markets closed Wednesday. Disney shares rose 53 cents, or 1.6 percent, to $34.36 Thursday.