[opendtv] Deal Could Offer New Disney Role for Apple Chief

http://www.nytimes.com/2006/01/20/business/media/20pixar.html?th&emc=th

January 20, 2006

Deal Could Offer New Disney Role for Apple Chief
By LAURA M. HOLSON and JOHN MARKOFF


LOS ANGELES, Jan. 19 -  Steven P. Jobs could be considered the Walt 
Disney of his era, breathing new life into animated movies with hits 
like "The Incredibles" and "Toy Story," and reinventing  Apple 
Computer as a media darling with its popular iPod.

Now Mr. Jobs is in negotiations to join forces with the  Walt Disney 
Company itself.

A deal would involve the sale of Mr. Jobs's Pixar Animation Studios 
for more than $6.8 billion to Disney, according to three people 
apprised of the negotiations. The sale, whose terms are still being 
negotiated, would make Mr. Jobs a major shareholder and director at 
Disney, which has been trying to find its footing in the changing 
world of animation.

And the merger could give Mr. Jobs a pivotal role, if he wants one, 
in helping shape the convergence of new media and old at Disney. 
"He's one of the handful of people who has shown the ability to guide 
both technology and entertainment companies and that might be quite 
useful to Disney," said Bran Ferren, a former Disney Studios Designer 
and technologist, who is now co-chairman of Applied Minds, a 
technology consulting firm based in Glendale, Calif. "What he has 
that is rare is taste, and that's a very valuable commodity if you 
can focus it and harness it."

  But the move is also potentially risky for Mr. Jobs, because it ties 
his fortunes to an old media company that, like other entertainment 
giants, is trying to navigate a difficult course these days.

For Disney, the acquisition would help by lifting the company's 
lagging computer animation ambitions. But it would also bring on 
board a visionary who has already done what Robert A. Iger, Disney's 
chief executive, has been trying to do in his first year running the 
company - be a major player in the entertainment world while using 
technological advances to distribute movies, music and TV shows 
through multiple sources.

"Investors may hope that Mr. Jobs's successful track record at  Pixar 
and Apple will rub off more broadly on Disney," said Richard 
Greenfield, a media analyst at Pali Research in New York.

Disney's board is expected to meet this weekend to discuss whether it 
wants to proceed with a merger, according to the people apprised of 
the talks. Two of those people said Disney and Pixar executives had 
not agreed on a price, and the deal could still be scrapped.

The merger discussions were first reported on Thursday by The Wall 
Street Journal.

But if the two sides are able to agree on a price, something that 
those involved say is likely, Mr. Iger will recommend to the board 
that Disney buy Pixar. An announcement could come early next week.

Many of the terms have been worked out. The new animation division 
would be overseen by John Lasseter, Pixar's chief creative officer 
and a former Disney animator, who would work with animators at 
Pixar's headquarters in Emeryville, Calif., and at Disney in Burbank.

It is not yet clear if there would be layoffs, although they would be 
likely. While Pixar under Mr. Lasseter has thrived, Disney's 
animation division has floundered, burdened by its past and its 
inability to adapt to an environment where pens and paper are being 
replaced by computers.

Analysts say a Disney-Pixar combination would be successful only if 
Pixar took the reins of animation at Disney, because the cultures are 
vastly different. "John Lasseter's role in any new incarnation of 
Pixar will be crucial," wrote Katherine Styponias of Prudential 
Equity.

Mr. Lasseter's involvement at Disney may end up contributing more to 
the merger's success than Mr. Jobs's, since it is likely that Mr. 
Jobs sees more of a future in Silicon Valley than in Hollywood. Mr. 
Jobs, said friends and associates, deeply believes the counterculture 
worldview that he articulated in Apple's "Think Different" 
advertising campaign.

A child of the 60's counterculture, even though he arrived at the 
tail end of the movement, Mr. Jobs has told reporters that he has 
never felt close to the Hollywood moguls he does deals with.

In his commencement speech at Stanford last year, after a bout with 
pancreatic cancer, Mr. Jobs told the graduating class: "Your time is 
limited, so don't waste it living someone else's life. Don't be 
trapped by dogma which is living with the results of other people's 
thinking. Don't let the noise of others' opinions drown out your own 
inner voice."

If he decides to sell Pixar - and Disney agrees to buy it - it is 
likely Mr. Jobs would be doing so because his inner voice remains 
closest to Silicon Valley. And there would be a lot of money in it 
for him. His 50.6 percent stake in Pixar would give him roughly $3.4 
billion worth of Disney stock if the deal is priced at $6.8 billion, 
making him the biggest individual Disney shareholder.

Those who are close to Mr. Jobs have said that despite his success in 
Hollywood and with animation, his heart has remained with Apple 
Computer, the quirky company that has established a loyal user base 
over almost three decades. Moreover, executives in the consumer 
electronics industry widely believe that Mr. Jobs is now positioning 
the company to repeat the iPod phenomenon in two markets: Internet TV 
and wireless smart phones.

These projects, which would extend Mr. Jobs's computer base into new 
industries that he could potentially transform as thoroughly as he 
has the music industry, may not both be introduced this year.

Mr. Iger began mulling a potential acquisition of Pixar last November 
when he concluded that distributing Pixar's movies was not of much 
value to Disney, according to a person who has discussed the matter 
with Mr. Iger.

At the time, Mr. Iger and Mr. Jobs were talking about whether Disney 
would extend its agreement to distribute Pixar films past 2006. (The 
two are in a joint venture, which ends with the release of Pixar's 
coming "Cars.")

Mr. Iger, according to one Disney investor, was in a difficult spot. 
Since being named chief executive last year, he had told Wall Street 
that his No. 1 priority was reinvigorating Disney's animation 
business. But in saying so, said one Disney investor, "Disney had 
boxed themselves into a corner." Pixar, in recent years, has been a 
steady supplier of new characters and stories for Disney, which were 
adapted for use in Disney's theme parks and consumer products.

Mr. Iger did not make Mr. Jobs an offer then. Price was an issue: Mr. 
Jobs wanted far more than $60 a share. Disney, for its part, wanted 
to see how its first foray into computer animation, "Chicken Little," 
would fare when it was released in November. (It performed well, but 
not as well as Pixar movies.)

"We suspect Disney was increasingly concerned with its upcoming 
internally generated animated films," said Mr. Greenfield of Pali 
Research. Indeed, last year Disney postponed one of the four 
computer-animated films it was betting on, "Rapunzel Unbraided."

In December, Mr. Iger and Disney's investment bankers started to 
think about buying a stake in Pixar instead. But by January, the 
person who talked with Mr. Iger said, the Disney chief was anxious to 
acquire all of Pixar.

Wall Street reacted positively to news of a potential merger. On 
Thursday shares of Pixar increased 2.8 percent, to close at $58.87. 
Disney shares rose 4 percent, to $26.24.

"Perhaps Steve is selling at the top of the market," Mr. Greenfield 
said. "He is finally ready to take a victory lap at what has become a 
successful company."

Laura M. Holson reported from Los Angeles for this article and John 
Markoff from San Francisco. Andrew Ross Sorkin contributed reporting 
from New York.
 
 
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