In what may signal the beginning of the end or perhaps a change in tactics of its long-running bid to take over troubled Image Entertainment Inc., Santa Monica's Lions Gate Entertainment Corp. has sold off 123,500 shares of the Chatsworth CD and DVD distributor.


The stock represents slightly more than 3 percent of Lions Gate's stake in Image. In all, Lions Gate owned 19 percent of the company.


Lions Gate executives declined to comment, but the sale comes in the wake of last fall's failed bid to elect a Lions Gate-backed slate of directors to the Image board and nearly two years of legal maneuvering. In 2005, Lions Gate launched an unsuccessful $93 million hostile bid for Image.


Although the sale was small, it is consistent with an orderly sell-off, one in which small amounts of the stock are sold gradually, said one analyst.


"Image (stock) trades at a very thin volume," of about 40,000 shares a day, said Natexis Bleichroeder analyst Alan Gould, who covers Lions Gate. "If Lions Gate chooses to get out, it's going to take long time to do it."


Image is much smaller than Lions Gate, with a market cap of just $75 million compared to Lions Gate's $1 billion. Lions Gate executives have said in the past the company has no interest in being a passive Image shareholder.


"They tried, got pretty far, so do they try again next year or do they get out?" asked Gould of Lions Gate's takeover bid. "We'll see, but I never understood why they were in that position in the first place; there doesn't seem to be much there for them."


The apparent appeal of Image was its CD and DVD distribution deals and library, which includes "Traffic," "Hoop Dreams" and the BBC's "The Chronicles of Narnia." Image has about 3,000 exclusive DVD titles and 250 exclusive CD titles domestically, with about 300 more international programs.


But Image has been a chronic financial underperformer. The stock hasn't traded above $4 a share in more than a year, and last month, the company posted a third quarter loss of $3.5 million, or 16 cents per share, from year-ago earnings of $2.3 million, or 11 cents per share.


Revenue fell 38 percent to $24.4 million in the quarter from $39.2 million in the prior-year period.


Lions Gate has established itself through a series of acquisitions that began with several small studios and production houses in the late 1990s. It's 2005 film "Crash" won the Academy Award for best picture.


The Lions Gate library brings in more than $200 million a year and is among the industry's most progressive in terms of marketing to new distribution platforms iTunes downloads of the popular cable series "Weeds" were bringing in about $50,000 a week last year.

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