Executive freaks and quarterback sneaks were fit to be featured this past week. Let's take a closer look.
$10 million a month is great pay -- if you can get it
When Michael Ovitz walked away after a stormy 14-month stint as Disney's (NYSE:DIS) president in 1996, he did so with some heavy pockets, thanks for a $140 million severance package. That's left a dark cloud hanging over the family entertainment giant ever since. Angry shareholders who decried the golden parachute filed a suit in 1997. This past week, they ultimately came up empty. The court sided with the company's board of directors that the Ovitz package did not constitute gross negligence.
The news led to a drop in Disney's stock price, so it was ironic to see some journalists report this ruling as a victory for the company. This was real money out of Disney's coffers. And if you think it through, Ovitz cost the company far more than $140 million.
When Michael Eisner brought on his friend Ovitz, he bypassed the logical internal candidate, Jeffrey Katzenberg. Neglecting the architect of Disney's revival in feature animation cost Disney dearly -- Katzenberg left the company and formed DreamWorks Animation (NYSE:DWA). That's $2.5 billion in market cap that could have been a part of the Magic Kingdom.
Disney also reported great fiscal third-quarter results on Tuesday. Eisner leaves the company on a sweet and sour note as he hands over his CEO title to Robert Iger. It's sweet in that the company is in excellent shape. Its media networks and theme parks divisions are doing great. But it's sour in that it will always be hard to live down the Ovitz fiasco -- no matter what the legal system ultimately decided.
Get Madden, get even
Any gridiron junkie worth his weight in Astroturf was probably lining up to score a copy of Madden 2006 this week. That's great news for Electronic Arts (NASDAQ:ERTS). The game publisher has sold more 43 million units of Madden football games since the series kicked off 16 years ago. That includes 6 million copies of last year's Madden 2005 blockbuster.
The timing is perfect. Preseason football just got under way, and this franchise is easy money for the folks at EA. The game introduces some new features, including an "NFL Superstar" mode that seems to borrow from EA's popular Sims product line. That's the beauty of Electronic Arts: It's not a one-franchise company. Sure, Take-Two Interactive (NASDAQ:TTWO) always draws a crowd with its Grand Theft Auto games, but it's stocking just modest hits beyond that. EA is packed, with more than 30 titles selling more than a million units last year.
Perhaps that's why Electronic Arts has served its investors so well. The stock has nearly doubled since being recommended in our Motley Fool Stock Advisor newsletter back in the spring of 2002.
With Microsoft (NASDAQ:MSFT), Nintendo (NQB: NTDOY), and Sony (NYSE:SNE) all looking to roll out new consoles over the next year -- and game prices supposedly inching higher -- the video game software sector will be a great place for investors, especially in a couple of years, when the new systems achieve a critical mass of users.
John Madden would probably call this a touchdown. Me? I consider it a sweep for EA.
The headlines behind this week's stories:
Until next week, I remain,
Longtime Fool contributor Rick Munarriz is a big fan of football video games. He will tirelessly root on his hometown Miami Dolphins no matter how sorrily they play this year. He does own shares of Disney. The Foo l has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
