Case Analysis: Michael Eisner has More Problems than He Can Face

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Eisner 's Mousetrap Disney 's CEO says the company has a lot of varied problems he can fix. But what if the real issue is something he can 't face? By Marc Gunther Reporter Associate Carol Vinzant September 6, 1999 FORTUNE Magazine) – Michael Eisner, the famously hands-on CEO of Walt Disney, is up to his old tricks. Last night he screened a rough cut of Dinosaurs, Disney 's big animated movie for next summer; he loved the story but complained that some jokes were stale. Today he 's holding a four-hour brainstorming session about Mickey Mouse, looking for ways to keep the 71-year-old rodent relevant. (One idea: a skateboarding Mickey.) Later, he 'll watch Peter Jennings ' newscast on Disney-owned ABC and surf the Internet to see how…show more content…
We 're being buried a little prematurely here." He 's right about the bottom line. Last year Disney reported revenue of $23 billion, operating income of $4 billion, and net income of $1.9 billion--its net was far more than that of Time Warner (owner of FORTUNE 's parent), News Corp., and Viacom combined. For the current fiscal year, which ends Sept. 30, Disney 's revenue is expected to reach $24 billion. But all other key indicators are down, some shockingly so. For the first nine months of fiscal 1999, excluding a one-time gain from an asset sale, Disney reported declines in operating income of 17%, net income of 26%, and earnings per share of 27%. Some Wall Street analysts have cut their fiscal 1999 earnings estimates as many as five times since last summer, and 13 of 25 analysts have a "hold" on the stock, according to Zacks Investment Research. The company has simply stopped growing, and it isn 't a momentary dip either: Operating income fell slightly last year too, and Disney isn 't expected to match its fiscal 1997 earnings until 2001 at the earliest--a startling comedown for a company that, for a decade after Eisner took over in 1984, delivered annual profit increases of 20% and a return on equity of 20%. Return on equity, a key benchmark that has been sliding ever since Disney 's 1996 merger with Capital Cities/ABC, has slipped below 10%, estimates

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