Disney Bear's Rebuttal
Rick Aristotle Munarriz (TMF Edible)

Numbers! I figured the bear would fight this with figures and the bull with passion -- not the other way around. Abacus wielded, am I supposed to buy the argument that a company that just grew revenues last year a scant 6% is a "reasonable" value at more than 10 times gross cash flow? And a company that had no free cash flow last year? (Cash burn!?)

My buddy Jeff must be readying himself for the Pollyanna casting call (another Disney character). Sure, earnings were up strongly from depressed margins the year before, but I think my counterpart, and the analysts who think 20% earnings growth over the next few years is feasible, will soon find out that it's a small world after all for Disney.

How is this company going to grow any business segment 20% much less the company as a whole? In the fourth quarter there was not a single category with double-digit top-line growth. Sure, the bottom-line was solid but you can't stretch a rubber band forever.

Jeff refers to the Disney characters as Minnie Moo cash cows that are "leveraged to the hilt." That is the problem. They are overexposed. They are tired. They have peaked. That is why Anastasia turned The Little Mermaid into sea suds when they went head-to-head over the holidays, with Anastasia drawing three times as many patrons at the box office.

The re-releases and direct-to-video features have become a worn out novelty. Jeff closes his argument by saying that "the market is blooming, and Disney is there to harvest the crop." Yes, it is a growing market, but the point is that it used to be Disney's field -- now it's public domain. Disney is about to give up market share and mind share. Harvesting crops? Disney is the decrepit scarecrow, now forced to watch the other media heavies pick away at the fruits of Disney's animated labor.

Do I want a Ted Turner doll? Nope. I'd prefer the Michael Eisner one -- the one with the $500 million stock sale transaction slip accessory. Obviously Jeff makes a compelling case. The Baptists did not put me up to this. Yet what irks me is that if the company does in fact grow earnings at 20%, which, again, I doubt, it won't be until after the first quarter of fiscal 2001 (at the current stock price of $107) that the stock trades at a similar P/E ratio of 20.

The capital appreciation over that time? Zip. A deed due. That is the problem -- and is why, a decade ago, I found it fitting to marry the girl and frame the certificate -- not the other way around.