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It was looking like News Corp was getting off its quarter-long roller coaster ride yesterday with a go-ahead vote to buy Dow Jones but elsewhere in media stocks, particularly entertainment, a different roller coaster ride kept going. After the close of market Tuesday,  DreamWorks Animation and CBS both released quarterly earnings.  It was a good day for animators, not such a good day for TV.

DreamWorks Animation(NYSE: DWA:)
DreamWorks Animation reported towering second quarter revenue with net income of $61.8m (60 cents a share) for the quarter ended June 30th.  Even subtracting a one time gain of 11cents a share for a reduction in reserves for home video sales, and another one time gain of 4cents from tax accounting,  it was huge return relative to last years income of 13.7m for the same period. 

Quarterly revenue in the film industry is highly variable and heavily influenced by the volume and quality of titles released at any given time.  DreamWorks strategy is to release one franchise title and one new film every year.  Shrek the Third was the franchise film for this year and it released this past quarter.  They’ll be living off of it for the rest of the year.

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For years, Sony’s gaming division helped offset research expenses and struggles elsewhere in the company.  Now, with the Playstation 3 platform aimed toward the future  (at the expense of today), the other divisions are having to carry gaming financially.   So far, it looks like they’re up to the task.

Amidst an earnings season filled with ups and downs, Sony announced earnings yesterday that were, in many ways, better than expected.  Click to Read More

With all the talk about the iPhone, it was almost easy to forget Apple’s product portfolio is one of the treasure chests of industry.  They make great returns on the entire iPod line.  They do a robust business with iTunes.  And of course, there’s the computer line which has a devoted, loyal fan base and a solid profit margin.

Today after the close of market, to the legions of Apple fans, and hungry investors anxious for a benchmark to measure performance of technology and consumer products, Apple announced their earnings for their fiscal third quarter.  The numbers were strong, and buried in the guidance there were hints of new products to come.

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Despite solid revenue growth, it was a rough day to be a Netflix shareholder.  On later confirmed expectations of weakening profits for the rest of the year, the stock was punished and down 12% during regular trading hours.  It continued to fall into after-hours sessions.

In the company’s earnings announcement released today, Netflix (NASDAQ: NFLX) reported Q2 revenue up 27% over the same period last year to $303.7m.  Earnings on revenue were $26.6m (37c/share) or 31 cents a share after subtracting a $4.1m one-time payment from Blockbuster as part of the two company’s settlement of patent litigation. 

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Microsoft rounded out the first big week of earnings season with an announcement on Thursday.  Unlike Google, which also reported, Microsoft safely met analyst expectations with sales of its Vista operating system solid enough to offset charges associated with the Xbox manufacturing troubles.

Microsoft earned 31cent/share after subtracting 8cents/share for one time charges for the Xbox 360.     Revenue for the quarter was up 13% to $13.37b.  Analyst expectations were for revenue of $13.27b.

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In ancient mythology, Icarus built wings of wax to fly.  As he soared, getting closer and closer to the sun, his wings began to melt.  Eventually, in most things, what goes up eventually comes down.  It’s gravity, laws of nature.   In business the same rules can apply too.  The higher expectations get, the more likely the odds of trouble.  The bigger you get, the harder it is to fly (e.g. grow at an outrageous rate).

After the close of markets today, Google reported its earnings for the second quarter. The numbers were good, 28% growth in revenue, but expectations were high up in the atmosphere. Analysts expected lower costs, and Google failed to meet profit expectations.  It was only the second miss since Google went public in 2004.  (Google does not give sales or earnings guidance and is tight lipped about expenses.   Without sharing such information, it’s especially difficult for analysts to make accurate projections. Given the history of growth, it was only a matter of time before analyst expectations exceeded reality).

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Ebay, and newspaper publisher Gannett were the latest entries in this weeks parade of earnings announcements.  Both companies reported earnings after close of market on Wednesday. The news was good for eBay, not so good for Gannett.

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