Disney's (DIS) Pixar Purchase: Never Give A Sucker An Even Break

Disney’s (DIS) Pixar division did fairly well with its new film "Ratatouille" which was No.1 at the North American box office this weekend, bringing in $47.2 million. But, according to CNNMoney, this was the worst Pixar opening weekend in nine years.

Steve Jobs did well selling Pixar to Disney (DIS) for $7.4 billion. One analyst called it a "near perfect strategic fit". Jobs owned about 50% of Pixar and got a seat on the Disney board along with a very nice pay day.

Based on Pixar’s financials, Disney paid 40 times trailing earnings and 21 times 2005 sales. Not exactly a bargain. Pixar had not really been doing that well. In 2005, revenue was $289 million and net income $152. This was only slightly better than the company’s performance in 2003 and 2004.

Pixar’s big film in 2004, "The Incredibles" brought in $261 million in the US. The company’s big release in 2003, "Finding Nemo" brought in $340 million. CNN’s analysis is that "if "Ratatouille" follows the same pattern, it will finish with about $189 million, becoming the third consecutive Pixar release to under-perform its predecessor."

It would appear that Jobs sold at the top. It would also appear that Disney got a lousy deal. It’s their own fault. Job’s was able to get more for the company than it was worth. The markets have learned not to underestimate him.

But, Disney got burned.

Douglas A. McIntyre can be reached at [email protected].