Walt Disney is not immune to Internet woes

Walt Disney Co. said Monday it will shutter long-struggling portal Go.com and refocus Internet efforts on the individual Web sites of its studio properties, theme parks and stores, Variety magazine reported. As part of the shutdown, the Burbank-based entertainment conglomerate will convert all shares of its Walt Disney Internet Group (DIG)tracking stock into conventional Disney shares, effective March 20.

The portal shutdown means 400 layoffs, mostly at Go.com’s Sunnyvale, Calif. campus. About a half-dozen executives of VP level and above are affected.

An additional 1,500 Disney Internet Group employees will remain with the company’s Web sites such as Disney.com, ABC.com, ESPN.com, DisneyStore.com and ABCNews.com. The move mirrors News Corp.’s recent decision to fold businesses in its Internet unit, News Digital Media, into its Fox.com, FoxNews.com and FoxSports.com Web sites.

Disney will take more than $800 million in mostly noncash write-offs in its fiscal second quarter in connection with the portal shutdown. The company is expected to release financial results for its first quarter, ended Dec. 31, early next month, Variety reported.

Chief financial officer Tom Staggs told Variety that the elimination of Go.com’s losses will help the Disney bottom line in future quarters. DIG posted a $1.1 billion net loss in fiscal 2000 including $242 million in cash losses before amortization of intangible assets. But Stagg emphasized that Disney in total spent less than $150 million ‘out of pocket’ on development of the portal.

DIG Chairman Bornstein will remain aboard at DIG, along with most senior executives at the unit. The abandonment of Go.com follows weeks of speculation that Bornstein would be stepping down from the company, as DIG’s stock has continued on a steady decline despite a high-priced redesign and a refocusing of services toward leisure and entertainment.

Execs said Disney’s new sites-based strategy won’t impair its eventual rollout of cutting-edge Internet-based services such as video-on-demand, interactive television and wireless entertainment. Disney said a ‘streamlined’ version of Go.com will continue to operate for an unspecified transition period; likewise the Infoseek search engine.

Disney’s 1999 acquisition of Infoseek spawned the creation of Go.com as a portal incorporating Infoseek Internet search functions and Disney Web content, with a tracking stock floated to exploit the enterprise. But the strategy was ever-shifting and never fully clicked.

In its original incarnation, Go.com was positioned as a search engine to compete against the likes of Yahoo. But the portal was too late to the scene, and its broad approach was revamped toward Hollywood-oriented functions, also to little success.

Last year, Disney rechristened its various Internet operations as the Walt Disney Internet Group to broaden investors’ focus beyond Go.com to other new-media technologies. But the spotlight remained on Go’s problems, and a broad downturn in the Internet economy didn’t help (education e-tailer ToySmart failed after Disney invested $45 million in it).

One annoyance saw Go.com settle a lawsuit filed by search engine GoTo.com over similarities between the two companies’ logos. Disney execs said it could cost $40 million to change the logo.

In addition to its sites related to core Disney brands, the company also operates Internet businesses including Mr. Showbiz, Movies.com, and NFL.com.