Eisner Drops Other Shoe

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After fighting off a campaign engineered by a member of the Disney family to force his ouster earlier this year, The Walt Disney Co. CEO Michael Eisner has thrown in the towel, announcing he’ll retire when his contract expires in 2006.

“I plan to retire from my role as chief executive officer of the company upon the conclusion of the term of my employment agreement on Sept., 30, 2006,” Eisner wrote in a letter to Disney’s board of directors that was also filed with the Securities and Exchange Commission. “Until then I shall continue to exert every effort to help the company achieve our goals, to assist the board in selecting the new chief executive officer and to make the transition expeditious, efficient and smooth and easy.”

Eisner’s announcement has set the speculation wheels in motion as to his successor. Although Eisner has said publicly that he would like current Disney president Bob Iger to replace him — and Iger has been making the rounds touting his past accomplishments — some observers feel he is too closely tied to the ABC Television Network’s failure to recapture its No. 1 position among the Big Four.

Other possible candidates to fill the CEO spot include former Disney executives eBay Inc. CEO Meg Whitman and Gap Inc. president and CEO Paul Pressler.

Other media honchos on the short list include News Corp. president and chief operating officer Peter Chernin, Comcast Corp. COO Steve Burke and Jeff Bewkes, chairman of Time Warner Inc.’s entertainment and networks group.

Sanford Bernstein & Co. media analyst Tom Wolzien called Eisner’s announcement a surprise and added in a research note that reports Disney will conduct a broad and thorough search for a CEO indicate Iger is not a lock for the job.

Wolzien added other media heavyweights like Viacom Inc. co-COO Les Moonves, former The Coca-Cola Co. and Time Warner Inc. executive Steve Heyer and NBC Universal executives Randy Falco and Jeff Zucker to the short list.

Disney also could dip into its own corporate ranks, Wolzien continued, naming Disney Media Networks co-chairman George Bodenheimer and Consumer Products chairman Andy Mooney as possible candidates.

In a report, Wolzien wrote that the Eisner announcement has brought a “climate of change” to Disney, but one that will last only if Disney “makes it clear this is a broad, careful and unbiased search.”

Wolzien said that at least one ambiguity would also have to be cleared up: Eisner’s resignation letter does not close the door to him becoming chairman, succeeding current chairman George Mitchell.

“If you’re really good and want to be the CEO, and somebody tells you that the guy who has been the CEO for 20 years is going to be the chairman, you’re probably going to say, 'I don’t know if I really want to do that,’ ” Wolzien said in an interview.

The announcement ends a 20-year run for Eisner, and one that was rife with controversy in the past year.

In the letter dated Sept. 9, Eisner praised Disney management and pointed out the growth of the entertainment giant since he came on board in 1984. Eisner ticked off a litany of statistics: total employees grew from 28,000 in 1984 to 117,000 this year; revenue increased from $1.7 billion to $30 billion; and enterprise value went from $2.8 billion to $57 billion.

“This, of course, is an outgrowth of the seven new parks, 28,458 new hotel rooms, 70 new cable channels around the world, and 800 new movies we created,” Eisner wrote.

Eisner led a practically charmed life in the early years of his tenure, as Disney stock rose rapidly and its studios continued to churn out hits. But as the stock began to slide, the film studios released a series of box-office failures and ABC television slid to the No. 3 spot, investors began to question Eisner’s leadership.

That reached a head earlier this year, when Comcast Corp. launched an unsolicited takeover bid for the company — which it dropped in April — and Roy Disney, former board member and nephew of founder Walt Disney, launched a campaign to oust Eisner.

Eisner fought back with his usual tenacity, but agreed at the company’s annual shareholders meeting in March to relinquish his chairman’s title to board member Mitchell.

While Eisner survived that campaign, he received what was considered to be one of the largest no-confidence votes in U.S. corporate history when 45% of shareholders withheld their votes for Eisner’s re-election to the board.

In recent months, however, the furor appeared to have died down as Disney started to hit the aggressive growth targets Eisner had set — 50% earnings growth for fiscal 2004 — and the stock price began to rise.

Disney shares were priced at $23.20, up 34 cents per share in afternoon trading Sept. 10.

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