NEW YORK (Reuters) - Shares of Pixar Animation Studios Inc. rose while those of Walt Disney Co. fell on Friday after the two failed to renew a lucrative film deal that yielded blockbuster hits for both companies.
Pixar shares rose 4 percent on the belief that it had the upper hand, as a list of suitors would likely line up to strike a deal. Disney shares fell 2 percent on concerns operating income at its filmed entertainment division could fall by 50 percent.
Talks between Pixar, which is run by Apple Computer Inc. co-founder Steve Jobs and Disney broke down on Thursday after 10 months of negotiations.
"We believe that Pixar has the upper hand relative to Disney, and it would be an attractive studio partner for all of Hollywood's major, global distributors," said Paul Kim, an analyst at Tradition Asiel. Kim said in a note Time Warner Inc.'s Warner Bros. was a potential front-runner among partners.
Kim said the split with Pixar could shave as much as 7 cents per share off Disney's estimated 2004 earnings.
But some analysts cautioned against a backlash on Disney's stock.
"We believe Disney will survive this setback, and will remain a powerhouse in animation, even after Pixar," said Jordan Rohan, an analyst at Schwab Soundview Capital Markets, in a research note. "We will only know for sure after 2006."
Pixar is still committed to deliver two more movies -- "The Incredibles" and "Cars" -- to Disney.
"We believe the economics that Pixar was seeking were not beneficial to Disney," said Mike Kupinski, an analyst at A.G. Edwards, in a note. "We would view any weakness as a buying opportunity, as we believe Disney's fundamentals are improving."
Shares of Pixar, whose films include "Finding Nemo" and "Toy Story," traded up $2.78, or 4.33 percent, at $66.98 on the Nasdaq market on heavy volume.
Disney shares lost 57 cents, or 2.33 percent, at $23.88 on the New York Stock Exchange.