Despite second-quarter earnings that handily beat Wall Street estimates, Seagram Co. Ltd. can't shake the flurry of rumors concerning the future of its Universal Studios operation.

Is Chief Executive Edgar Bronfman Jr. planning to sell off the entire division? Will Seagram just sell its movie studio? Will the company spin off its music group? What's up with those ambitious theme parks?

Bronfman denied the rumors last week, saying he was "angry and frustrated" by all the speculation, but that hasn't stopped analysts, the media and investors from opining that some of the Seagram property is on the block.

"The fact that Bronfman got rid of the television operations suggests that he wouldn't be averse to getting rid of the film side or the entire entertainment side," said David Davis, an analyst at Houlihan Lokey Howard & Zukin. "That's probably why the rumors won't stop."

News reports late last week had News Corp.'s Rupert Murdoch putting out feelers to the Bronfman family to determine their willingness to sell part or all of their entertainment holdings.

But the likely scenario, many say, is that Seagram will sell its film unit to Barry Diller's USA Networks, just as it did with its television operations about two years ago. Diller has denied he's buying, but that hasn't stopped some from drawing a compelling argument: The 45 percent stake Seagram now holds in USA Networks is worth almost $8 billion, more than Seagram paid for its entire stake in Universal five years ago.

Diller's history of managing entertainment operations keeps this rumor alive, said Keith Howlett, an analyst at Research Capital Corp. in Toronto.

But a sale of the film unit is just one of the rumors fueled largely by a sudden rise in Seagram stock, which soared from $36.63 in October to a high of $65 earlier this month, before dropping to the $60 range last week.

Some of that gain, analysts said, is due to increased interest in media stocks after the announced merger plans of America Online and Time Warner Inc. The subsequent announcement that Time Warner's music group would merge with British music company EMI Group further encouraged speculation in media stocks.

It's also possible that investors got wind that Seagram would be reporting an especially strong second quarter in advance of the announcement.

"In today's market, you've got a lot of itchy trigger fingers," said Steve Cesinger, an analyst at Greif & Co. "So it's not surprising that everybody looks around and says, 'Who's next?' It's easy to look at Seagram and say that something's going on there."

Besides Murdoch and Diller, other rumored acquirers of some or all of the units include AT & T; Corp., Yahoo Inc. and Microsoft Corp.

"(The AOL-Time Warner deal) has really thrown everything into a tizzy," Cesinger said. "With the Warner deal, now the speculation is that all these other Internet-related companies are going to try to play in the content arena."

But Yahoo is mostly interested in day-to-day Internet services such as e-mail and stock portfolio management, and Microsoft is focusing primarily on distribution. A play for Universal by either of those companies would mean straying from their current strategies.

AT & T; has an entertainment pact with media mogul John Malone's Liberty Media Group. Malone's name, too, has been mentioned as a possible Universal Studios buyer. "The question is whether John Malone wants to buy," Cesinger said. "I can see him taking a stake, but I can't see him buying it outright. I can't see him wanting to take on the headaches."

That leaves other entertainment companies.

"I think DreamWorks would be a good match, because they could use it. Disney could use that film library," said Jay Cooper, an entertainment lawyer at Manatt, Phelps & Phillips. "But this is all pure speculation."

While experts have been closely analyzing the film division, little attention is focused on the theme parks that are tied to Universal's film business.

"If they were looking at a (film) deal, the theme parks would follow, but they would follow in another step," Howlett said. "It doesn't make a lot of sense to have the theme parks without the movie business."

Universal Studios Florida was formerly a day-trip destination drawing people visiting Disney World in Orlando, but the theme park operation is expanding into a multi-day destination called Universal Studios Escape. In addition to the recently opened Islands of Adventure and CityWalk, Seagram owns a stake in three planned hotels at the site, the first of which just opened.

Expansions are underway for Universal Studios Hollywood and CityWalk in Universal City. The company also owns interest in parks or exhibits in Japan, Beijing and Barcelona, Spain.

For 1999, the Universal theme parks and other recreational ventures generated $45 million in operating income; for the three-month period ended Dec. 31, operating income was $20 million, up from $15 million for the like period in 1998.

"The question is, are the theme parks bringing in enough? Even if they are, maybe it's not something (Bronfman's) really interested in," Cooper said.

Music appears to be the safest of all units, due to Internet expansion opportunities, the investments Seagram has made to bolster music operations, and Bronfman's personal interest in the group. Seagram bought giant music company PolyGram for $10 billion in 1998.

"There's clearly no chance that they'll sell that given what they believe to be potential opportunities and growth with the Internet," said Scott Davis, an analyst at Schroeder Wertheim & Co.

Because of restructuring costs associated with the Universal-PolyGram merger, Universal Music Group reported a $126 million loss for 1999. For the quarter ended Dec. 31, the group reported $292 million in operating income, up from pro forma income of $246 million for the same period in 1998.

Those numbers are expected to keep improving as the business recovers from the merger.

If Seagram jettisons the film unit, and subsequently the theme parks, that would leave Seagram in the liquor and music business. While they don't seem the most obvious match, there are similarities.

"I think the economics of the music business are more attractive to Seagram in that they're similar to the booze business," said Howlett. "They generate cash flow on a relatively low investment in building brands. I think it's a business that meets their historical attitude toward business, rather than the very capital-intensive theme park business and the movie business."

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