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Iger will try to revitalize Disney's animation

The incoming CEO inherits pluses and tough challenges

LOS ANGELES — The Robert Iger era is beginning at Disney.

The incoming chief executive will inherit a mixed bag Saturday when he becomes only the sixth person to lead the Walt Disney Co., replacing longtime CEO Michael Eisner.

The 54-year-old Iger takes over a company whose ABC network is on the rebound, whose theme parks are recovering from the 9/11 tourism slowdown and whose film division has lined up a slate of potential blockbuster movies, including two sequels to "Pirates of the Caribbean."

But he will face considerable challenges as he tries to execute his vision of expanding Disney internationally and leading the company into a digital future.

Perhaps his most important task involves animated films, a franchise lost in recent years to Pixar Animation Studios Inc. and DreamWorks Animation SKG Inc.

"Bob Iger's highest priority in our view is to re-establish Disney and its affiliates as the pre-eminent source of animated film," said Laura Martin, an analyst with Soleil-Media Metrics.

Disney stumbled in recent years with traditional hand-drawn feature films while competitors were finding great success with computer-generated movies. The company has since switched to computer animation.

Iger is already trying to strike a new distribution deal with Pixar, a move that would give Disney breathing room as it launches its own slate of computer-animated films, beginning with this year's "Chicken Little."

Iger has also convened a group of top executives who will work with a management consulting firm to envision what Disney and its component businesses will look like in 2015.

In recent months, Iger has declined requests for interviews about his plans, preferring to keep a low profile during the transition.

But he has told analysts that adapting Disney's content to the digital future will be one of his priorities.

Consumers "are going to put demands on how, when, where and how much they consume in media and how much they spend as well," Iger said at a recent investment conference. "Those dynamics, we believe, create a voracious appetite for content."

While Disney continues to rebound and promise double-digit growth this year and next, Iger will face hurdles sustaining that growth long-term, analysts said.

In recent years, Disney has aided its bottom line by shedding underperforming assets, such as its chain of retail stores, and is now talking to potential suitors about its radio business. For the latest quarter, net income rose 41 percent to $851 million, compared to $604 million in the same period last year, thanks to higher ratings for ABC shows such as "Desperate Housewives" and increased attendance at its theme parks.

Disney's stock has rebounded from a low of less than $15 a share in 2002 and has traded between $22 and $29.99 per share for the past 52 weeks.

Iger does not have the luxury of raising already expensive theme park prices to boost growth. And his plans to expand the company's television and movie businesses into China and Asia will be tempered by restrictions placed on American media by those countries.

He has told analysts he is happy with Disney's current size and mix of businesses, a structure that has helped the company weather downturns in tourism and slumps in the television advertising market.

"We like the size of the company today given the environment and have no plans to split it up and make it smaller," Iger told analysts, referring to plans by rival media company Viacom Inc. to split into separate entities to operate its TV and movie interests.

Iger inherits a much different operation than the one Eisner found when he took the company's reins more than two decades ago.

In 1984, Disney was a small, sleepy movie studio with three theme parks and a moribund animation department. Eisner was able to quickly raise prices at the parks and invest in animation, moves that led to quick growth.

Unlike his predecessor, Iger will not be consumed with quieting corporate turmoil and fending off dissident shareholders.

After being named Eisner's successor in March, Iger quickly persuaded ex-directors Roy E. Disney and Stanley Gold to drop their two-year feud with the company.

Disney, the nephew of company namesake Walt Disney, was named a director emeritus and consultant last July. In exchange, he and Gold agreed to support Iger's leadership.

Iger also moved quickly to mend fences with Bob and Harvey Weinstein, co-founders of Miramax, the Disney-owned company responsible for some of its parent's most respected films.

Iger "has subdued most of the fires of the past," said Harold Vogel, head of the investment firm Vogel Capital Management and a longtime Disney observer. "That gives management time to focus on the future more confidently."

The transition to the Iger era has gone smoothly, with Eisner taking a back seat for most of this year and letting his second-in-command take the spotlight.

"He did it the honorable, wise and decent way," Vogel said.

For his part, Eisner has not focused on the transition. Speaking to film and television executives this week, he made only a passing reference to his departure, noting the ratings success ABC has had so far this season.

"And just in the nick of time," Eisner joked. "Next week, I couldn't take credit for it."