Disney buys Club Penguin, profit up

By Gina Keating

LOS ANGELES (Reuters) - Walt Disney Co. (DIS.N) reported a 4.7 percent increase in net profit on Wednesday, driven by strong television program sales and higher receipts at its theme parks.

The company also announced on Wednesday it had purchased kids' virtual world Club Penguin for $350 million in cash plus up to $350 million more depending on the Web site's earnings in 2008 and 2009.

Disney Chief Executive Robert Iger said he expects the acquisition to immediately begin contributing to the company's bottom line.

Disney, which runs the ABC and ESPN TV networks and produces shows through its ABC Studios division, said its fiscal third quarter net income from continuing operations rose to $1.196 billion, or 58 cents a share, from $1.095 billion, or 51 cents a share one year ago.

The 58 cents per share topped the average analyst forecast of 55 cents according to Reuters Estimates.

Revenue rose 7 percent to $9.045 billion.

Disney shares were off slightly in after-hours trading at $33.66 from a close of $33.83 on the New York Stock Exchange.

Analyst David Miller of SMH Capital said Disney shares often fell following a pre-earnings run up. Shares had closed up 2.5 percent for the day.

"The company is firing on all cylinders. The fundamentals remain very good. If you believe in the earnings power for the media networks in fiscal '08 then the stock looks very cheap," SMH Capital analyst David Miller said.

Burbank, California-based Disney said operating income in its Media Networks group, which includes ABC, ESPN and cable TV networks such as The Disney Channel, grew 6 percent to $3.8 billion and operating income was up 23 percent to $1.4 billion.

The cable TV networks group saw operating income gain $88 million to $1.1 billion primarily due to growth at all-sports network ESPN and domestic cable TV networks. ESPN produced higher revenues from affiliates and better subscriber growth.

Operating income from TV broadcasting increased $165 million to $295 million. Much of the gain came from sales of ABC Studios programs.

PARKS PERK UP

Parks and Resorts, which includes the Walt Disney World park in Florida, saw revenue rise 6 percent to $2.9 billion and operating income gain 13 percent to $621 million. Walt Disney World saw higher spending and greater attendance. Higher ticket prices helped boost Disneyland revenues in Southern California.

The company's movie studio, which released hit "Pirates of the Caribbean: At World's End" and animated comedy "Ratatouille" toward the end of the quarter, saw revenues rise 4 percent to $1.8 billion but operating income plunged 20 percent to $192 million due mostly to lower DVD sales.