M-I-C ... See Ya Real Soon?

PHOTOGRAPHS FOR TIME BY CLARK MITCHELL/4G2

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Comcast's bid put a dark cloud over what Disney had planned as a turnaround party. Eisner had invited dozens of stock-market analysts and journalists to Walt Disney World in Orlando, Fla., to announce with fanfare that the company's quarterly profits had increased sharply and to project that earnings in 2004 would rise as much as 30%. But Eisner wound up talking more about why Disney should be left alone. "We love being a content company," he told the analysts. "We've been a content company for many years. We do think content is, if not king, then king and queen." He brushed off the royal pain of Comcast's offer.

Meanwhile, Roberts was in New York City telling shareholders that Comcast could run Disney better than Disney can or more pointedly, better than Eisner can. In a press conference, Roberts and Comcast Cable president Stephen Burke promised they would increase Disney's cash flow by up to $1.2 billion in three years. "You have to be reasonably skeptical about that," says Moffett. Yet Disney's 2003 net income is down $583 million from its 1998 peak of $1.85 billion, and Disney shares hovered at about $24, down from a high of $43.63 in April 2000, before a run-up last week on takeover speculation. The pair underlined Disney's shortcomings. Among them: the ABC television network, mired in fourth place in the ratings war, made just $37 million in 2003, after clearing $1 billion in operating income in 2000; and Eisner failed to deliver the cash forecast from his $5.2 billion purchase of the Fox Family Channel, which was renamed the ABC Family Channel. Over at Disney's animation division, Comcast says, it would reignite a legendary workshop that Eisner downsized. "When the division was firing on all cylinders," said Burke, "it cranked out hits like The Lion King and Beauty and the Beast, which flowed through the rest of the company and re-energized everything. Disney all but abdicated that business."

Comcast's gibes sound a lot like the criticisms flowing from shareholders who have grown irate over Eisner's stewardship. He has been contending with a shareholder uprising led by ex-board members Roy Disney and his partner, Stanley Gold. The duo quit the company last fall, fed up with Eisner's alleged mismanagement, and are trying to persuade shareholders not to re-elect him at the company's annual meeting on March 3. Eisner suffered a body blow when Steve Jobs, Pixar Animation Studio's boss, decided not to renew a co-production and distribution agreement after 10 months of sometimes acrimonious negotiations. Pixar's computer-animated films, from Toy Story to Finding Nemo, have produced billions in revenue for Disney.

Perhaps the most stinging charge is that Eisner has repelled corporate talent, particularly anyone with CEO potential. Disney has suffered an exodus of executives during his tenure. Its cast members no longer include execs like Paul Pressler, now at Gap; Geraldine Laybourne, who quit to co-found Oxygen Media; and Jeffrey Katzenberg, the man behind The Lion King, who co-founded DreamWorks. Comcast's No. 2 executive, Burke, is a fast-track escapee. He spent 12 years at Disney and proved himself a skilled executive by recharging Disney's consumer-products division (it faltered after he left) and reviving Euro Disney (another recent relapse), then working in Disney's TV-networks business. Katzenberg is effusive: "When we started DreamWorks, I tried desperately to get him to come on board. That's how much I admire him. He's an amazing talent."

Disney's best defense may be "Just say no." Wall Street already thinks Roberts made a lowball offer. His initial bid valued the company at about $54 billion in stock, roughly a 10% premium over the price at the time. But its shares immediately shot up nearly 15%, past the value Roberts attached, suggesting that the Street thinks Disney could fetch a price in the 30s, up from last week's closing price of $26.92. Asserts Roberts: "Everybody says, 'My house is worth more.' The question is, Are there other people who are willing to pay more?" Murdoch has already said he's not playing, and Time Warner has indicated that it's not interested. Roberts isn't likely to get sucked into a bidding war. He walked from the sale of Vivendi Universal's assets last year when the price got too rich for him. Disney could conceivably buy a cable company too, making itself too big to be swallowed. But that scenario seems unlikely.

One of the most tantalizing prospects of a Comcast-Disney merger is returning Pixar to the family, which could change the deal calculus. "I've always thought that Disney was the only logical partner for Pixar," says Larry Haverty, managing director of State Street Research in Boston, which holds 5 million Disney shares. "If Roberts knows something about what Jobs is likely to do, he can be very aggressive in his bidding." A source close to Comcast says, "Brian has reached out to Steve. They've made contact in the last week or two."