Eisner to leave Disney in '06

critics call it `the right move'

`A fantastic ... ride for the past 20 years,' chief executive says

September 11, 2004|By Andrew Countryman | Andrew Countryman,CHICAGO TRIBUNE

Embattled Walt Disney Co. Chief Executive Officer Michael D. Eisner will step down in two years, the media giant said yesterday.

Eisner said he would leave the post he has held for two decades when his contract expires in September 2006, igniting speculation about his successor.

"It has been a fantastic Disney ride for the past 20 years," he wrote in a letter to company directors. "I expect the next two years will be critical to the future of our company and that we must take advantage of the positive projections we anticipate."

The firm's chairman, former Sen. George J. Mitchell, said the advance notice allows the board to continue its "deliberative process" to find a successor.

"We respect Michael's decision," he said. "We are deeply grateful for his remarkable 20 years of creative leadership."

Shareholders who waged war against Eisner rejoiced.

"Eisner's resignation as CEO is the right move for shareowners. We believe he should resign from the board as well," said Sean Harrigan, president of the California Public Employees' Retirement System.

"It is not clear to us how a two-year lame-duck CEO will benefit shareowners, and his continued presence on the board would prevent the company from the clean break that is needed to restore investor confidence," Harrigan said.

Eisner was stripped of his chairmanship in March after a campaign led by founder Walt Disney's nephew, Roy Disney, prompted 45 percent of the vote to be withheld from Eisner's re-election to the board. Eisner also fended off an unsolicited buyout bid from Comcast Corp.

"It has been a tough year for Michael Eisner," said analyst David Mantell of Loop Capital Markets in Chicago. "I think he has gotten to the point ... that he's really become tired of having to defend himself and his record, because he has done a number of good things."

Eisner has presided over tremendous growth at Disney. After he took over in September 1984, the stock price rose nearly 40-fold to its all-time high in May 2000. But it has since fallen more than 47 percent and now trades at 1996 levels. Shares rose 1.3 percent yesterday to close at $23.16.

Eisner was well-paid for his efforts, which generated controversy. In the firm's 1996 fiscal year, he received options valued at more than $195 million, on top of $8.6 million in cash.

Analysts said Disney's shares could benefit in the short-term from Eisner's decision.

In a report, Credit Suisse First Boston analysts called the announcement "a positive catalyst on the stock, as it gives visibility on what investors have viewed as the most vexing question - succession plans."

Analysts quickly stepped up speculation on that front. Attention focused on company President Robert A. Iger, whom many view as Eisner's choice.

Several analysts, including some at UBS and CSFB, pegged Iger as the front-runner and said he would be an appropriate choice.

Two prominent outside names are Disney veterans: eBay Inc. CEO Meg Whitman, a former senior vice president of marketing in Disney's consumer products division; and Gap Inc. CEO Paul Pressler, former chairman of Disney's parks and resorts.

Other possible contenders, analysts said, include News Corp. President Peter Chernin; high-ranking Time Warner Inc. executive Jeff Bewkes, the former CEO of the HBO cable network; and Viacom Inc. co-President Leslie Moonves.

Mantell called Iger "a strong candidate, but not the only candidate," because the board may want a clean break with the Eisner era.

"They're going to be considering other candidates because of that regime continuity issue," he said. "I think they're going to be sensitive to that."

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