Disney beats in Q2, but the studio division is one embarrassing mess

In addition, revenues and free cash flow declined by 7% and 40%, respectively. Not so encouraging, is it? The individual operating segments also saw sharp declines in their separate profit statements. Consumer products: down 24%. Media business: down 4%. But here's the worst culprit of all: studio division, down 97%!

Oh, come on! You know, this company really gets me when it comes to its movie business. I've been a longtime shareholder, and I personally think that the studio division is a very important part of the overall shareholder-value model. Yes, first you have parks, but a close second is the studio. Movies can be a great source of profits and synergy . . . assuming the studio that develops them is run properly.

Let me emphatically state the following for the record: CEO Bob Iger has absolutely no idea what to do with his studio system. Yes, I know other media companies are having problems with their own motion-picture divisions. I don't want to hear it, Bob buddy. I know the DVD markets are slowing and that Google's (NASDAQ: GOOG) YouTube has altered the distribution landscape. You've got to adapt, Bob. To that point, a Reuters article discussed Iger's consideration of reducing the studio's total output.

Okay, now I'm really angry. I'm not kidding. We've heard this one before! You already tried this! Seriously, this guy just doesn't get it. How dense can this CEO king who makes multiple millions of dollars be?! Here's the secret: make more movies for less! Stand up to the Hollywood agent system and demand that talent accept smaller compensation packages.

Oh, and why the heck is Iger concerned about reducing film output? Didn't he just express his desire to get into the Steven Spielberg business when he struck a deal with the famous director's DreamWorks company? Even before that deal was officially struck, I argued against it.

Well, let me calm down and talk about the stock. Yes, let's try to forget about that embarrassing 97% drop in the studio division's income (you'd like us all to forget about that, wouldn't you, Bob?). Disney closed in the after-hours session on Tuesday up 4%. Looks like the market cared only about the earnings beat. It conveniently ignored everything else. Well, that's okay I suppose. I'd rather see my shares go higher than lower.

But would I buy Disney now? Nope. I'd rather get in on a pullback below $20 per share (as I write this, shares were currently priced at above $24). In fact, next time it goes back below $20, I really should see about initiating a trading position in addition to my long-term position. For now, though, I'll wait and see how the price action further develops.

Disclosure: I own Disney, GE; positions can change without notice.