A $4 million write-down bludgeoned fourth-quarter earnings of Canada-based IMAX Corp. (IMAX) – Canada’s large-screen film production company – which posted a net loss of $10.1 million, or 25 cents a share.

The write-down was related to old film-based equipment as the company continues its shift into digital-based technology. Excluding the write-down and a $2.5 million theater sale in Rhode Island, the company posted a loss of 21 cents per share and a 13% decline in revenue – still below analysts’ expectations, Reuters reported.

Co-Chief Executive Officers Richard Gelfond and Bradley Wechsler said last year “was a year of extraordinary progress from a strategic standpoint” and that progress made in 2007 has yet to materialize in financial results.

For example, the company signed agreements for 107 IMAX- theatre systems in the fourth quarter of fiscal 2007, compared to nine in the fourth quarter of 2006.

“We are looking forward to emerging from this transitional period and believe our roll-out of digital systems in the back half of 2008 will lay the foundation for financial improvement later this fiscal year,” Gelfond and Wechsler said in a statement.

The Big Picture

IMAX is known for its large-format, color-and-sound-enhanced films specially filmed for presentation on large screens that are usually owned by third parties.

While its financial results are trending down, the company is in a great position to profit as the motion-picture industry – like nearly every business sector – evolves into a bigger and more efficient business.

But there is one notable exception. IMAX doesn’t face much competition for its bread-and-butter business: enormous and entertaining movies drenched in digital sound.

Shares of the company’s stocks rocketed 62% on a single day in December when IMAX announced a deal that will install 100 digital projection systems in AMC Entertainment Inc. theaters across North America.

The deal doubled IMAX’s North American venues and guarantees regular airing of its films, amounting to an estimated $30 million to $35 million in additional cash flow.

Also last year, the company inked two separate development deals in China – a 10-screen deal with Wanda Cinema Line Co. [China’s fastest-expanding multiplex developer] and a five-screen deal with Hong Kong-based Lark International. 

And the recent hit its stock took from fourth-quarter earnings is a great opportunity for speculative investors to get in early on IMAX if the large-screen craze takes off in the next few years.

News and Related Story Links:

• Reuters: IMAX loss widens, hit by film-equipment write-down
• IMAX Corp.:IMAX Corporation reports fourth quarter and fiscal 2007 financial results
• Money Morning: The Big Picture: IMAX Inks 100-Screen Deal and Eyes Asia Expansion

The Walt Disney Co. (DIS) has picked a favorable time to make its big push into Asia. The Lunar New Year on Feb. 7 marked the beginning of the Year of the Rat.

And I think we know which "rat" Disney is hoping will win over millions of new Asian fans in the coming year and beyond.

From its humble beginnings as a cartoon shop in the 1920s, Disney has grown into an international multimedia conglomerate focusing on four key areas: media networks, parks and resorts, studio entertainment and consumer products.

While the Dow Jones Industrial Average component’s shares have been battered like most of the market of late [shares are up just 0.9% year-to-date as of Friday's close], Disney is still posting strong results.

Earnings for the fiscal first quarter was reported Feb. 5 and beat analyst expectations. Net income was $1.25 billion, or 63 cents per share, compared with $1.7 billion, or 79 cents per share for the same period, a year prior. But even with the decline, Disney managed to beat analyst estimates of 52 cents per share by a healthy margin. The results were due in part to healthy cable sales and theme-park revenues.

Due to the success of Disney Channel programming, Chief Executive Officer Robert Iger has been able to negotiate higher rates with cable companies that air its content. Cable revenue increased 13%.

And a weak U.S. dollar has been bringing foreign tourists to Disney’s U.S.-based theme parks in droves. Theme park revenue was up 11% for the quarter.

Disney has ordered two new cruise ships and will also be building a resort in Hawaii.

While a softening U.S. economy is expected to have some effect, Disney is turning its eyes to faster growing foreign markets to offset U.S. declines.

"[These results bode] well for its international diversification," Janna Sampson, chief investment officer at Oakbrook Investments LLC, told Bloomberg News. "It’s showing the benefit of that as well as Mr. Iger’s management."

Reaching Out to China

The Burbank, Calif.-based powerhouse is trying to take its enormous success into the fast growing markets of India and China.

Disney’s current projects are already wildly successful in the Asian markets. The popular television film, "High School Musical," and its sequel did big business overseas with over $30 million in DVD and CD soundtrack sales.

An estimated 18.1 million people in Asia viewed the original film, while the soundtrack went on to platinum-level sales in Singapore, Malaysia and Australia, and triple platinum in both the Philippines and New Zealand.

"Asian kids are no different from American kids when it comes to the notion of following your dreams and expressing yourself," Gary Marsh, president of entertainment, Disney Channel Worldwide, told Reuters. "If we create programs that embody the right themes and have the appeal our audience wants, it crosses gender, cultural and geographical boundaries."

But Disney doesn’t just want to sell its American content to foreign markets. The media powerhouse is also looking at creating customized programming for local markets through partnerships with local media companies.

"As the Bell Rings," a short television show that started in Italy, now has local versions airing in the United Kingdom, the United States and Australia. It’s a great example of adapting content to fit local audiences.

Singapore’s version will premiere in March this year and China currently filming its own version of the program, Marsh said.

The Disney Channel already airs in most Asian countries including India, Indonesia, Singapore and Australia, and reaches 380 million in the region, compared with just 95 million in North America.

In China, Disney Channel has partnered with state broadcaster CCTV and other Chinese broadcasters to air Disney content.

There’s even talk of a Shanghai-based theme park. Citing undisclosed sources, state-controlled newspaper, The Shanghai Securities Journal reported Friday that the company had received necessary government approval for the project to move forward.

But Disney refused to comment on the report, stating that it will continue to focus on its Hong Kong location, which opened in 2005.

Going Local in India

 While as yet, there are no talks of an India-based theme park, Disney does have a television media deal similar to its China arrangement. Disney has partnered with UTV Software Communications Ltd. and it recently paid $203 million to increase its share in the India broadcaster from 13.7% to 32.1%.

Disney initially took a position in the company in July 2006 when it acquired Hungama TV, a popular children’s program in India. The company affirmed that by increasing its stake, it was also increasing its commitment to the Indian market.

"We are pleased with our initial investment in UTV, which has strong local brands and media properties that provide complementary growth platforms to Disney’s existing branded efforts," Andy Bird, chairman, Walt Disney International, said in a company statement. "The UTV management team is proven and well-respected, and we look forward to continue to work with them."

Outside of the United States, India represents Disney’s largest foreign investment to date. Its first animated movie created by and for Indians will be released in summer 2008, the first creation of its partnership with noted Bollywood film studio Yash Raj Studios. The film, "Roadside Romeo," features the voices of leading Bollywood stars Saif Ali Khan and Kareena Kapoor.

The film is expected to do quite well as Disney content has proven hugely popular among Indian families. "The Lion King," "Chronicles of Narnia," "The Incredibles" and "Pirates of the Caribbean: Curse of the Black Pearl" are the highest selling DVDs of all time in India, according to company data.

News and Related Story Links:

• Reuters:
  Disney Channel goes local to court Asian viewers

• The Guardian:
  Disney foothold in India

• Bloomberg:
  Disney First-Quarter Profit Beats Analysts’ Estimates

• MSNMoney:
  Report: Disney Shanghai talks progress