Disney Camps’ Personal Appeals

Forget presidential candidates Sen. John F. Kerry, Sen. John Edwards and Howard Dean.

Some the most frenetic politicking these days isn’t over who should occupy the Oval Office but rather the chairman’s suite inside the Team Disney building in Burbank.

In what amounts to Wall Street’s spring primary, Walt Disney Co. Chairman Michael Eisner and his two foes, former directors Roy E. Disney and Stanley P. Gold, are launching rival whistle-stop tours of major institutional shareholders. The tussle could help decide whether Eisner continues running the company he has headed for nearly 20 years.

The duel is set to shift into high gear this week.

Eisner is conducting a three-day investors’ conference at Walt Disney World in Orlando that will coincide with what is expected to be a banner fiscal first-quarter earnings report. His message: He has succeeded in turning Disney around.

Meanwhile, in what some see as an attempt to upstage that event, Disney and Gold this week will hold a conference call of their own with institutional investors. Their message: Eisner has mismanaged the company and should go.

The campaigns will culminate at Disney’s annual meeting March 3 in Philadelphia, where there is sure to be no brotherly love on display between the two sides.

Disney and Gold, once again seeking to steal Eisner’s thunder, will hold a reception and briefing for stockholders the day before the company chairman takes the podium. They are urging a vote of no confidence against Eisner and three board members up for reelection. Among other things, they cite Eisner’s inability to renew the company’s lucrative contract with Pixar Animation Studios.

Uncommon Access

It’s not uncommon for Disney or media companies to give periodic updates to influential shareholders as well as stock analysts whose recommendations are closely watched by investors. Nonetheless, in the eyes of several analysts, Eisner’s wooing of Wall Street has been unusually intense since Disney and Gold abruptly resigned from the company late last year and began waging an uphill battle to unseat him.

“Disney has been making its top management available for formal and informal meetings with analysts in an unprecedented way,” said Tom Wolzien of Sanford C. Bernstein & Co., who was recently contacted by Eisner for a one-on-one meeting.

Eisner also has employed the personal touch with others. Corporate-governance advocate Nell Minow, one of the company’s most outspoken critics, was caught off guard when Eisner himself recently requested a sit-down meeting.

“He called me and said, ‘Do you have a few minutes to get together?’” Minow recalled. “I was surprised.”

Not every analyst is getting such warm treatment. Richard Greenfield, an analyst with Fulcrum Global Partners and one of only a few analysts with a “sell” recommendation on Disney’s stock, said his e-mail invitation to attend the Orlando conference was withdrawn by Disney two weeks ago.

After he cited the incident during a segment on CNBC, Disney blamed the withdrawal on a technical error and promptly reinstated the invitation, Greenfield said.

“I’m just happy to be attending the meeting in person,” he said. Greenfield is arranging a conference between Roy Disney and some of his clients, who include major investors in Disney and other media companies.

Disney spokesman John Spelich dismissed Greenfield’s comments as “a grab for media attention.” Stressing that the withdrawal was a glitch that was quickly corrected, Spelich said: “He was never told he was not invited.”

Disney and Gold have been getting their message out through stockholder organizations such as Institutional Shareholder Services, the Council of Institutional Investors and Glass Lewis & Co.

Like other analysts and investors, Wolzien has been worked by both sides.

He said Roy Disney’s representatives contacted him shortly after his meeting with Eisner two weeks ago to make their case against management. “They’ve been proactive,” he said.

The battle for Disney’s shareholders is largely one of perception. Roy Disney, nephew of company namesake Walt Disney, contends that the corporation has lost its vision.

He cites a series of strategic missteps by the company, high turnover, Disney’s weak financial results over the last decade and the mishandling of key business relationships, including the ties with Pixar. The break-off in contract negotiations with Pixar effectively ended a partnership that produced some of the biggest hits in movie history, including “Finding Nemo,” the most successful animated film ever, with global ticket sales of $850 million.

Most analysts accepted Disney’s rationale that Pixar’s contractual demands were excessive. But the fallout continued last week after Pixar chief Steve Jobs blamed Disney for the breakup and sharply downplayed Disney’s creative contribution to their partnership.

“We have every expectation that you will see a lot of glitz and razzle-dazzle at Disney’s annual meeting,” Roy Disney wrote in an open letter to shareholders posted on his website, Save Disney.com. “Unfortunately, in our view that has been the modus operandi of the company in recent years: a lot of fluff and not enough substance.”

At least so far, however, the message seems to be gaining little traction among most longtime investors and analysts, who are encouraged by the company’s improved performance.

“I just don’t think Roy Disney and Stanley Gold have much of a case,” said Larry Haverty, managing director of State Street Research & Management Co., which owns more than 5 million Disney shares.

Upbeat on Outlook

In their recent meetings with analysts and investors, Disney executives have painted a rosy outlook for the company, pointing to the ongoing success of the Disney studio, which set an industry record last year with more than $3 billion in worldwide box-office receipts. The company also has seen steady improvements in its consumer products and theme parks businesses, which had been hammered by recession. These results are the chief reason behind a more than 40% gain in the company’s stock price last year, executives say.

The Orlando conference will give “investors an opportunity to hear and see details of how the Disney management team is implementing the company’s plans to deliver earnings growth over the next several years,” said Spelich, the Disney spokesman.

Disney executives also have downplayed the importance of the Pixar relationship. And they suggested that Gold and Disney had become a distraction and a source of instability on the board.

The company is “aggressively courting the Street,” said one analyst who has met with Disney President Bob Iger. “There’s no question in my mind that a big impetus was the criticism they were gathering” from Roy Disney and Gold.

Whatever the reason behind the outreach, analysts said they’ve appreciated the opportunity to gain input from Eisner and other Disney executives. “It’s welcome,” Wolzien said.

Minow, the corporate governance expert, said she was impressed by Eisner’s willingness to meet with her last week. Also in attendance was former Sen. George Mitchell, now a presiding director at Disney.

Afterward, Minow said she felt assured by their commitment to strengthen the board’s independence and address long-standing shareholder concerns about the lack of a succession plan for Eisner.

“For the first time,” Minow said, “I really had the sense that they were paying attention.”