Using the Terminal Tutorial as a guide, use the Bloomberg Terminal to gather valuation data. Determine whether Disney paid too much for Pixar.

Raising Capital A SHORT PRE-DISNEY HISTORY OF PIXAR The Apple II, a technological innovation responsible for ushering in the personal computer revolution, was released in April 1977. This early computer was a primitive machine with four kilobytes of internal memory and completely dependent upon two floppy disk drives outputing to a green low-resolution monochrome monitor. At the same time, George Lucas was developing Star Wars and struggling to find a way to incorporate special effects that would convince viewers they were travelling through space and visiting uncharted planets. Lucas tried to build a team of effects experts by picking over the leaders of 20th Century Foxs in-house special effects department, which had recently been dismantled. Douglas Trumbull, best known for his work on 2001: A Space Odyssey, was committed to Steven Spielbergs Close Encounters of the Third Kind (1977) but suggested his assistant John Dykstra as a possible candidate to lead Lucas new group. Dykstra pulled together a small team of college students, conventional artists, and engineers and set up shop in a warehouse in Van Nuys, California and called the group Industrial Light and Magic (ILM). Since its formation, ILM has become the benchmark for realistic, compelling, and prescient, special Calculate a company's value based on its funding, identify the events in a company's history that increase its value, and explore how increased enterprise value leads to founder and investor wealth. The common thread of an entrepreneurial journey involves risk and return. As an enterprise evolves from idea to product to commercial market to profitability, its risk profile softens. Founders always carry the largest risk burden; however, successful founders also see significant returns. Most entrepreneurs monetize their investments through an initial public offering or by being acquired. In this Case, you will walk through the value creation process of a company by converting the story of Pixar into a funding and valuation waterfall, and then youll calculate the founders (Steve Jobs) return on his initial investment to determine whether a companys value is fair. RAISING CAPITAL / BLOOMBERG BUSINESSWEEK CASE STUDY 2 Bloomberg L.P. animation, was taking a fresh look through the eyes of its new CEO, Michael Eisner. Eager to return Disney to the glory days as the animation innovator, Eisner was convinced that Pixars technology was well ahead of the competition. Pixars technology was incorporated release of Beauty and the Beast in 1991. Steven Spielberg used Pixar technology in Jurassic Park to generate photorealistic images of dinosaurs. Pixar was a technological marvel. But it was unprofitable. Even Steve Jobs was getting impatient with the companys inability to find a business model that could monetize its technology. With the survival of Pixar at stake, John Lasseter pitched Disney with an idea that would bring in needed cash. But Disney had different plans. They were trying to woo Lasseter to be a Disney director. Lasseter came up with the idea of a Christmas special from a toys perspective. Pixar would produce the movie and Disney would distribute it. After a string of failures and lessons, Toy Story was created. Toy Story was released on Thanksgiving Weekend in 1995. It opened at #1 and would become the highest grossing film of the year, making $192 million in the United States and $362 million worldwide. The completion of Toy Story taught the company a lot about computer animation. It also taught them a lot about business. The company had given away much of the positive economic benefit of its first hit to Disney. Jobs sat down with the company and determined they needed to move from being a production company to being a studio. Such a move would require a lot of capital. At the end of Toy Storys first week, Pixar listed its shares in the largest initial public offering of the year. The company sold $132 million in stock for $22 per share. Steve Jobs, the companys largest shareholder, still held 80% of the companys stock. From Pixars IPO to Disneys acquisition of the company for $7.4 billion in May 2006, Pixar produced seven animated feature films, all of which were blockbusters. Pixar Animataed Feature Productions Productions through Acquisitions, Box Office Receipts are in US$ Millions Release Title US Box Office Global Box Office Nov 95 A Toy Story 191.8 373.6 Nov 98 A Bug's Life 162.8 363.0 Nov 99 Toy Story 2 245.9 497.4 Nov 01 Monsters Inc. 255.9 543.4 May 03 Finding Nemo 339.7 899.2 Nov 04 The Incredibles 261.4 633.0 Jun 06 Cars 244.1 462.2 PIXAR FUNDING AND VALUATION WATERFALL Steve Jobs purchased the company from Lucasfilm for $10 million and invested an additional $60 million in the company. Assume that until the company went public, Steve Jobs held 100% of Pixars shares. After Pixar went public it had 96.3 million shares outstanding and 80% of those were held by Steve Jobs. The shares were listed at $22 per share. Pixars shares were publicly traded from 28 November 2006 to 8 May 2006, when Pixar was purchased by Disney for $7.4 billion. effects. Star Wars owes much of its success to the power of its special effects. Although computer technology was nascent in development and completely unused in the early Star Wars franchise films, Lucas was convinced that it could eventually play a critical role in special effects. However, after a thorough assessment of the state of computer technology, Lucas concluded that no individual firm nor any group of firms together were on the path to developing useful computer technology capable of devel-oping the computerized effects he wanted. He would need to build his own computer division. Ed Catmull was hired away from the New York Institute of Technology in 1979 to head Lucasfilms computer division. Lucas wanted Catmull to do three things: 1. develop a computer system that could edit a films visual and audio components digitally; 2. create a laser printer capable of exporting images and sound directly to film; and 3. generate graphics in digital format. John Lasseter, who began his animation career as a student at Cal Arts (a school founded, funded, and patterned on Walt Disneys animation) was fired from The Walt Disney Company for promoting computer animation. He joined the computer graphics division of Lucasfilm in 1983 where he combined his animation skills and directors flair with the groups technological capability. Star Trek II: The Wrath of Khan includes a simple scene of the Genesis Effect where a lifeless planet is rapidly transformed by lush vegetation. The whole scene was generated in a computer animated sequence by the Lucasfilm computer division. It was the first of its kind. Other small projects incrementally refined the groups capabilities until they were asked to make a stained glass knight emerge from a window and walk in the movie Young Sherlock Holmes. By the spring of 1985, the computer divisions technology, Marionette and RenderMan, set the technological standard in film industry but commercial success was still far away. Meanwhile, Steve Jobs was forcibly and very publicly removed from Apple Computer Company, which he started in 1976 and developed into a multi-billion dollar enterprise. Jobs was introduced to Pixar by Alan Kay, a computer scientist and personal friend of Jobs. On 30 January 1986, Jobs purchased the Lucasfilm computer division which had been named Pixar and only had forty employees, for $10 million. Over the next decade Jobs wrote personal checks of $60 million to support Pixar. In 1988 Pixar released Marionette, a proprietary animation system in addition to RenderMan, a proprietary rendering software. Sales of Marionette and RenderMan continued to be soft. But a remarkable combination of leading technology and a craftsmans ability to tell stories in John Lasseter led to production of computer generated animation in short films and advertising spots. Lasseter and Bill Reeves received an Academy Award for their short Tin Toy, which became the basis for their first full-length motion picture, Toy Story. Integration of computer animation into commercial advertising spots for Tropicana, Trident, and others provided Pixar with some cash to help pay their bills and pursue their artistic endeavors. Disney, which used to look disdainfully on computer.