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Disney flat despite Net efforts

The magic of the Internet hasn't rubbed off on the entertainment giant's stock--at least not yet.

The magic of the Internet hasn't rubbed off on Disney's stock--at least not yet.

The entertainment giant's plans to launch a full-fledged portal site with Infoseek and Starwave, announced last week, have done little, if anything, for its shares--in stark contrast to many

Michael Eisner
other companies, whose stocks have jumped on the slightest mention of the word "Internet."

Disney stock closed at 108.75 today, up 1.1875. It fell on Friday, and was down earlier today, largely on news that some analysts had chopped earnings estimates for the giant or had downgraded its shares.

For example, Brown Brothers Harriman analyst Mary Ann Winter lowered her long-term rating on Disney to "neutral" from "buy." She kept her short-term rating on the stock at neutral.

Winter cited concerns about Disney's "creative content business," which includes films and consumer products, during the next few quarters, and expressed concern about the creative content business in Japan in particular. She was more bullish about Disney's theme park business, however.

Bear Stearns analyst Raymond Katz cut his earnings estimates on Disney to $3 a share from $3.12 for 1998, and from $3.65 to $3.50 for 1999. Katz did not change his rating on the stock, however.

NationsBanc Montgomery Securities also downgraded Disney from "buy" to "hold."

Analysts said it makes little sense why any Internet announcements should do much for Disney's stock, since online represents such a small part of the media giant's business. On the other hand, a well-articulated Net strategy has breathed new life into many companies. One example: Netscape Communications.

Disney's foray onto the Net isn't new, and sources say chief executive Michael Eisner has been involved in helping the company's strategy all along. But Eisner's public comments about his efforts have been kept to a minimum until about two months ago.

In an April speech to business and economic writers in Orange County, California, the CEO said Disney planned to compete aggressively on the Internet, and alluded to a portal plan.

Disney's plan to buy the rest of Starwave, as well as last week's deal with Infoseek, also were announced by Eisner.

Last week's deal called for Disney to buy a 43 percent stake in Infoseek in exchange for Disney's ownership in Starwave plus $70 million in cash. It ended a week of speculation that the two would combine forces. Eisner said the deal stakes out "an even more ambitious role for Disney in this enterprising medium."

Reuters contributed to this report.