Ed Driscoll

Speaking of Hollywood Blues...

AP reports that Dreamworks has lowered its “full-year profit outlook“:

LOS ANGELES — Less than a year after going public on the strength of hit films such as “Shrek,” DreamWorks Animation Inc. SKG is battling a DVD market slump that forced it to warn Monday of a loss in the second quarter and to lower its full-year outlook.

The Glendale-based company, which badly missed first-quarter profit estimates due to disappointing revenue from home video sales of “Shrek 2,” also disclosed that it is the target of a securities probe into the trading of its stock and release of first-quarter results.

The company said it is cooperating with the Securities and Exchange Commission inquiry, adding that the investigation “should not be construed as an indication that any violations of law have occurred.”

The firm also said its main shareholders decided to postpone indefinitely a planned $500 million offering of common stock.

The series of disclosures sent DreamWorks shares tumbling $3.54, or 13.2 percent, to close at $23.27 on the New York Stock Exchange. Shares dropped as low as $22.88 earlier in the day.

The stock had climbed as much as 52 percent after its trading debut last October, but it now is about 17 percent below its initial public offering price of $28.

The company blamed the weakened earnings forecast on waning demand for home videos. It cited a review of current sales and inventory that prompted an increase in reserves for returned products.

“What appears to be the case is that over the past several months, retail inventory for titles in catalog is lower than what we have traditionally experienced, both domestically and internationally,” Chief Financial Officer Kris Leslie told analysts during a conference call. “This is contributing to a higher level of both actual and expected returns.”

Maybe they should give Govindini Murty a ring!