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© 2003, DOW JONES & COMPANY, INC. ALL RIGHTS RESERVED www.barrons.com MONDAY, OCTOBER 13, 2003 Coy Story Will Steve Jobs jilt Disney? No matter what happens, Pixar stock seems overvalued TINY PIXAR IS THE HOTTEST TICKET in Hollywood. Fresh off the huge success of its latest animated movie, "Finding Nemo," an emboldened Pixar is bargaining hard over a new film-distribution agreement with its partner, Disney, while weighing offers from other studios. "Finding Nemo" is the highestgrossing movie in the U.S. this year, with projected domestic box-office revenue of more than $335 million. "Nemo" is expected to generate over $1 billion of revenue after international distribution and video sales, netting about $500 million in total …show more content…

The current five-movie distribution deal was signed in 1997, when Pixar needed Disney' s financial muscle. Neither Disney nor Pixar is commenting publicly on the high-profile talks. Savner, who began coverage of Pixar with a Sell rating last month, says investors "have overestimated" the benefits of a new distribution arrangement. He calls Pixar "capacity-constrained" for the foreseeable future. Pixar is stepping up production, planning to release one movie in each of the next three years, versus the 18month gap between its last two, "Nemo" and "Monsters Inc." But says Savner: "You can' t simply double production. There' s a finite amount of talent." Even if Pixar gets all the profits of its films starting with the 2006 movie, it still must produce hits. The buzz is good on "Incredibles," supposedly about a dysfunctional family of superheroes that come out of suburban semi-retirement to save the world. Pixar is as close to a sure thing as exists in the unpredictable movie business, but no one in Hollywood ever has had an endless winning streak. "It' s hard to put a string of 10 mega blockbusters together," says Savner. "The first time a movie doesn' t perform well. The stock will be down and could be dead money until the next movie a year later." The blockbuster results for "Nemo" have set the bar high. Even

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