VideoRemember the scene in fantasia in which Mickey Mouse dons the sorcerer's hat, takes up his magic wand, and then struggles to contain the damage from the forces unleashed? That's the way Richard Nanula must feel some days. After all, since resuming his finance duties in February 1996 (after a brief hiatus), the 37- year-old chief financial officer of The Walt Disney Co., in Burbank, California, has faced down one nightmare only to have another one pop up.
Consider this string of events: Hollywood superagent Michael Ovitz makes a supercostly departure after serving a supershort stint as Disney's president. Prime-time ratings plummet amid management turmoil at newly acquired ABC. Hackles arise over Nanula's accounting for the acquisition. The company's latest animated blockbuster, Hercules, disappoints at the box office. Finally, Wall Street analysts cut their fiscal 1998 earnings estimates.
After years of stellar performance, Disney's stock badly trails the Standard & Poor's 500 this year, even after a recent upturn (see chart, page 33). Robert Olstein, who runs the $215 million (in assets) Olstein Financial Alert Fund, in Purchase, New York, gave up on Disney a year ago, unloading more than 40,000 shares. "They wrote off a lot of programming assets," says Olstein, and that told him the company was on the verge of "a period of stagnation."
A less talented and committed CFO than Nanula might wish he hadn't gotten his old job back from Stephen Bollenbach.
In fact, a few months before Bollenbach joined Disney from Marriott in April 1995, Nanula doffed the CFO hat, which he had worn since August 1991, and replaced it with that of president of The Disney Store Worldwide. Yet Nanula, one of the very few black CFOs at major U.S. companies, insists that he did not feel shunted aside to make room for Bollenbach. He notes that chairman and CEO Michael Eisner had long wanted him to gain operating experience.
Says Eisner: "I always thought it would be good for everybody to have some operating experience, and this was an opportunity for him to have it. He would have wished, and I would have wished, that it had gone on a little longer. It was short, but we needed him back at corporate."
Most observers accept that characterization of the situation. Sure, adds Alan Schwartz, executive vice president and head of investment banking for Bear, Stearns & Co., "there was not a lot of precedent for it," notwithstanding official statements to the contrary. And the consumer products division, of which the Disney stores form the biggest part, is not a big contributor to the company's revenues. But, says Schwartz, "the stores are an interesting place to gain operating experience, because they're one of the areas that's going to produce the synergies" that Disney is looking for between animation and follow-on sales. Indeed, after TV and radio stations, the consumer-products division currently boasts the widest profit margin among all of Disney's businesses (see chart, page 34).
But some believe Nanula was less pleased than he claims to have been about the move. He certainly had reason to be irked. Both Nanula and Bollenbach had worked for financial wizard Gary Wilson, the chairman of Northwest Airlines Corp., Disney board member, and former CFO of both Disney and Marriott. As Eisner puts it, Nanula was "trained by a brilliant professor," and is "on track" to surpass him.
But Bollenbach was better known for his bold use of leverage in various high-profile deals. And while many analysts say Nanula is no less talented, a source close to Nanula, who asked not to be identified, says Eisner brought in Bollenbach to impress analysts after the loss of the highly regarded Frank Wells, the former Disney president who died in a plane crash in April 1994. "Michael needed a name to satisfy Wall Street," says the source.
Eisner vigorously denies this. "It's completely fallacious," he says, adding, "This is the first time I've heard it."
Regardless of Eisner's motivation, Nanula's move to the Disney stores "looked to the outside world like a demotion for Richard," says the source. Bollenbach promptly won credit for wrapping the Capital Cities/ABC Inc. deal, which added more than $9 billion in debt to Disney's theretofore pristine balance sheet, even though Nanula had been working on the deal long before Bollenbach's arrival.
"Everyone makes a big deal about Bollenbach closing ABC, but all it took was a phone call," says the anonymous source. (Nanula declined to comment about his successor's role in the deal, and a spokesman for Bollenbach declined a request for an interview.) Over at the Disney stores, meanwhile, "Richard had to wonder if he'd ever get back to corporate," says the source.
As it turned out, Nanula did not have to wait long. When Bollenbach left in early 1996 to take over the reins of Hilton Hotels Corp., Eisner immediately turned the CFO duties back to Nanula. And he now identifies him among several senior executives he calls his "Number Two." Wall Street is also quick to shower Nanula with praise.
Nanula does display some pique toward the news media, accusing them during an interview in his wood-paneled office at the company's headquarters of dwelling inordinately on Disney's mistakes and on threats, real or imagined, to Disney's franchise.
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