INApril,theWaltDisneyCompanysummonedmovietheaterexecutivesforarareaudiencebefore itsreigningkingofanimation,JohnLasseter.AcofounderofPixaranddirectorofToyStory,Mr. LasseterwasunveilingtherosteroffilmsthatanalignedPixarandWaltDisneyAnimationStudios plannedtoreleaseoverthenextfouryears. WalkingonstagewearingoneofhistrademarkHawaiianshirtsthisonewithyellowandgreen palmtreesMr.Lasseterwasgreetedbygigglesandpointingfromasmatteringofaudience members. WhatdidyouthinkIdwear?heaskedamidthetitters.Abusinesssuitandapairofmouseears, mostlikely. WhenDisneyboughtitsrival,Pixar,in2006for$7.4billion,manypeopleassumedthedealwould playoutlikemostbigmediatakeovers:abysmally.Theworriesweretwofold:thateitherDisney wouldtramplePixarsespritdecorps(turningMr.Lasseterintoadrone,chantingHiHoenroute toMickeysanimationmines)orthatPixaranimatorswouldactlikespoiledbratsandrebuketheir newowner. Bothcompanieshadahistoryofacrimony,andRobertA.

Iger,thenewchiefexecutiveofDisney, wasamystery.CouldhemanagethemegawattpersonalitiesPixarwouldbringintoDisneysfold? Someanalysts,investorsandmediapunditsalsoquestionedtheheftypriceDisneypaidforasmall studiothatreleasedonlyonemovieayear. ButtwoyearsintotheintegrationofPixarandasthecompanyrollsoutWallE,ariskylove storyaboutrobotsthatisestimatedtocostatleast$180millionthemergerisnotableforhow wellitsfaring.Indeed,inanindustrywherecorporatemarriagesoftencreateinternalwarfare (ParamountandDreamWorksSKGarethemostprominentexample)DisneyandPixarhavefounda waytomakeitwork. Mostacquisitions,particularlyinmedia,arevaluedestroyingasopposedtovaluecreating,and thatcertainlyhasnotturnedouttobethecasehere,saidDavidA.Price,authorofanewly publishedbookfromKnopf,ThePixarTouch:TheMakingofaCompany. Thesmoothridesofar,atleastalsoseemstobepleasingWallStreet,wheregrumblingabout Pixarspricetaghasdieddown.Disneysstockhasclimbed28percentsinceits52weeklowon Jan.22,inlargepartbecauseofinvestorconfidencethatthecompanycanovercomeadifficult economybyleveragingPixarscomputergeneratedcharactersacrossitsvastempire.Inrecent months,Disneysshareshavesignificantlyoutperformedthoseofmostofitscompetitors. Carstellsthestory.ThefilmwasregardedbysomecriticsasoneofPixarsweakerstorytelling efforts,anditgeneratedsoftforeignsaleswhencomparedwithhitslikeFindingNemo.But CarshaspumpedbillionsinprofitintoDisneyviaawiderangeofancillarybusinesses. Thefilmrackedupover$460millioninglobalticketsalesandhassold27millionDVDs.Related retailproductshavegenerated$5billioninsales.ACarsvirtualworldisopeningontheInternet, aCarsiceskatingshowwillbegintouringthenationinSeptember,andworkisunderwayto bringanentireCarsexperiencetotheDisneylandResortinCalifornia. Youcanaccomplishalotmoreasonecompanythanyoucanaspartofajointventure,Mr.Iger saidinaninterview.Itmakesabigdifferencewheneveryoneisworkingforthesamesetof shareholders. INasubtlebutimportantshift,Pixarhasmatured,allowingitsstrategicthinkingtoevolveinsidea sprawlingcorporation.Forinstance,someofthestudiosexecutivesonceresistedsequelsand directtoDVDefforts,arguingthatqualityandthebrandcouldsuffer.Whilesequelswerenotoutof thequestion,theysaidPixarshotstreakhingedonpushingboundarieswithoriginalmaterial.

ButatMr.LasseterspresentationinApril,Disneysfirstsucheventin10years,heannounced Cars2,a2012sequelthatwilltakeLightningMcQueenandhispalsonatourofforeign countries.AlsointheworksarefourdirecttoDVDmoviesbuiltaroundTinkerBell. Wearedefinitelyplanningondoingmoresequels,justaswearemoreoriginals,Mr.Lassetersaid inaninterview.WetalkwithBobIgeraboutwhichonesmakesensetodofromabusiness perspective.Buteachmoviehastobeabsolutelygreatoryouwillsnuffoutafranchise. AndthePixarteam,whichalsohasoversightofWaltDisneyAnimationStudiosandtheDVD focusedDisneyToonStudios,decidedthatitwasO.K.tooutsourcesomedirecttoDVDanimation toanIndiancompany,adeparturefromitsrigidstancethatoutsideanimatorscouldnotdeliverthe necessaryquality.(Mr.Lasseterwillstillcloselymonitortheefforts,however.) Forthefirsttime,Pixarisalsoscheduledtodelivertwomoviesinasingleyear:Newt,thestoryof asalamanderssearchforlove,andTheBearandtheBow,anactionadventurestarringan imperiousScottishprincess;bothfilmswillarriveinmultiplexesin2011. HowDisneyandPixararemakingtheintegrationworkholdslessonsforotherexecutivesfacedwith thedelicatetaskofunitingtwocultures.Tacticsthathaveservedthecompanieswellincludethe obvious,likeeffectivelycommunicatingchangestoemployees.Otherdecisions,includingdrawing upanexplicitmapofwhatelementsofPixarwouldnotchange,havebeenmoreunusual. Noneofthishasbeeneasy,saidRichardCook,chairmanofWaltDisneyStudios,butithelps wheneveryonehastremendousrespectbothprofessionallyandpersonallyforoneanother. Mutualrespectwasscarceatthetwocompaniesjustthreeyearsago. Pixar,basedinEmeryville,Calif.,andDisney,withitsheadquartersinBurbank,Calif.,hada notoriouslystrainedrelationship.Pixarschairmanandchiefexecutive,StevenP.Jobs,abruptly calledofftalkstocontinuealucrativepartnershipwithDisney,whichhadhelpedtofinanceand distributedsuchPixarfilmsasMonsters,Inc. Mr.Jobs,alsothechiefexecutiveofApple,hadbitterlyclashedwithMichaelD.Eisner,whowas thenrunningDisney.Theriftencompassedmanyissues,nottheleastofwhichwasbasictrust.In oneincident,Mr.EisnerdisparagedanAppleadvertisingsloganbeforeaCongressionalcommittee andthenclaimedthathehadnteventhoughhistestimonyhadbeentranscribed. TheendresultwasthatMr.JobsandothersatPixardidntplacemuchfaithinwhattheirDisney counterpartstoldthem. AfterMr.IgertookthereinsatDisney,herestartedacquisitiontalksandwonsomeearlysupportat Pixarbytalkingcandidlyandclearlyaboutthelessonshelearnedwhenhispreviousemployer,the ABCtelevisionnetwork,enduredtwotakeovers.PixarexecutivesrecallMr.Igerjokingthatifhe everdecidedtowriteabook,itwouldbetitledIveBeenBought,becausethetwomerger experiencesweresoformativeforhim. EdwinCatmull,thepresidentofPixarwhowasalsoputinchargeofWaltDisneyAnimation Studios,said,ItbecameverycleartousthatBobIgerhadbeenthroughmergersbefore,both positiveandnegative. Mr.IgeralsoagreedtoanexplicitlistofguidelinesforprotectingPixarscreativeculture.For instance,Pixaremployeeswereabletokeeptheirrelativelyplentifulhealthbenefitsandwerent forcedtosignemploymentcontracts.Mr.IgerevenstipulatedthatthesignonPixarsfrontgate wouldremainunchanged. Still,Mr.Catmullconcedesthattrustdidntcomeeasily,especiallyinanagewhensomecompanies promiseonethingbeforeamergerandthenseemtodoanotheroncethedealisdone.

Ittookaboutayearbeforetherewasacollectivelettingdowntheguard,hesaid.Initiallypeople werethinking,Issomethinggoingtohappen? RegardingDisneyslistofpromises,Mr.Catmullsaid:Weveneverhadtogobackandlookatit. Everythingtheyvesaidtheywoulddotheyhavelivedupto. Mr.Jobs,whobecameDisneyslargestshareholderandaboardmemberasaresultofthe transaction,didnotrespondtointerviewrequests. Inmostacquisitions,theconquerortypicallyreignssupreme.WhenNBCboughtUniversalStudios, executivesatthemoviestudioinLosAngeleswereovernightrequiredtostartcommutingto NewYorkforgruelingfinancialplanningmeetingsatthebehestofNBCsowner,GeneralElectric. Employeeswerealsostartledtowakeuponthemorningaftertheacquisitionannouncementtofind thattheiremailaddresseshadalreadybeenalteredtonbcuni. AnNBCUniversalspokeswomandeclinedtocomment.Althoughanalystsgenerallythinkthat UniversalPictureshasbeenwellservedbytheG.E.takeover,theycitedthecompanysaggressive handlingofthemergerasonereasonthestudiosrespectedchairwoman,StaceySnider,quitthe company. ButinthePixaracquisition,Disney,despiteitslegendarycorporateidentityandstrongwill,held back.Pixarkeptitsemailsystem.NobodywasshippedtoWaltDisneyWorldinFloridatoworka shift,partoftheinitiationthatotherexecutivesmustendure.NoswitchboardoperatorsatPixarwere askedtoendtelephonecallswiththewordsHaveamagicalday,astheydoelsewhereinthe company. And,ofcourse,Mr.Lassetercontinuedtowearwhateverhewanted,Hawaiianshirtsandall. Infact,adeepDisneyintroductionandvisitdidntcomeuntilthisspring,whenarandom selectionof200ofPixars800employeesspentthedayinBurbanktouringtheliveactionstudio andconsumerproductsdivision. Thereisanassumptioninthecorporateworldthatyouneedtointegrateswiftly,Mr.Igersaid. Myphilosophyisexactlytheopposite.Youneedtoberespectfulandpatient. Keytothesuccessfulintegration,analystssay,hasbeenMr.Igersdecisiontogiveincomingtalent addedduties.InsteadofjustbuyingPixarandmovingon,Mr.Igerunderstoodwhatmadethe acquisitionvaluable,saidMr.Price,theauthor.Ifyouareacquiringexpertise,hesaid,then dispatchyournewlypurchasedexpertsintootherpartsofthecompanyandletthemstretchtheir muscles. InDisneyscase,Pixarwasassignedthedifficulttaskofturningaroundastoriedanimation departmentthathadfallenintodisrepairasitstruggledtofinditsfootinginanewworldof computergeneratedpictures.Atalowpoint,the2002filmTreasurePlanetfloppedsobadlythat Disneywasforcedtotakea$98millionwritedown. AwindowintohowtherebuildingeffortisgoingwillcomeonNov.26,withthereleaseofBolt, thetaleofaHollywooddogstarwhobecomeslostinNewYorkandhastomakehiswaybackto California.Mr.Lasseterandhisteamhaveheavilyreworkedtheproject,includingplayingupa wickedlyfunnysidecharacter,ahamster. AlthoughsomebloodlettinghasbeeninvolvedinPixarseffortstorebuildthestudiotheoriginal directorofBoltwasreplaced,resultinginsomehurtfeelingsMr.Lassetersaidhewaspleased withthewaythetransformationwasprogressing.Wewereverynervouscomingin,buttoseethe changehasbeenamazing,hesaid.Disneyhasbecomeafilmmakerledstudioandnotan executiveledstudio.Weareveryproudofthat.

Therelationshipcouldstillsour,ofcourse,andbigtestsloom. StillverymuchaworkinprogressistheturnaroundofWaltDisneyAnimationStudios,whereithas takenMr.CatmullandMr.Lasseterlongerthaninvestorsanticipatedtosortthroughthepipelineof existingprojectsandbegingreenlightingnewones. Disneysplansforhanddrawnanimationareunclear,withonlyoneprojectcurrentlyannounced: ThePrincessandtheFrog,amusicalsetinNewOrleansthatisscheduledtohaveitspremierein December2009.ADisneyspokeswomansaidanimatorsweredeeplyimmersedinmarryingolder handdrawntechniqueswithnewtechnologyforfuturemovies,addingthatplansforanew headquartersforDisneysBurbankanimatorswereslowlyprogressing. PIXARSlistofcomingmoviesincludessomewithunusualconceptsthatmightnotlend themselvestothekindofmerchandisingtieinsthathavemadeCarsajuggernaut.Up,thenext bigPixarfilmafterWallE,isacomedyaboutacranky,canewielding78yearoldwhotransports hishometoexoticlocalesbyattachinghundredsofheliumfilledballoons. WiththeexceptionofUp,whichisbeingdirectedbyPeteDocter(Monsters,Inc.),Pixaris placingsomeofitsbiggestnewprojectsinrelativelyuntestedhands.BrendaChapman,thedirector ofPixarsfirstfairytale,TheBearandtheBow,servedasastorysupervisoronmodernclassics likeTheLionKingbuthasonlyonepreviousdirectingjobunderherbelt,forThePrinceof Egypt. Ofcourse,Mr.Lasseterwillbehelpingtoguidetheway,buthemustcopewithextremedemands forhistime.Asidefromoverseeinganambitiousslateofmovies,Mr.Lasseter,whonowshuttles betweenBurbank,nearLosAngeles,andEmeryville,outsideSanFrancisco,isinvolvedin everythingfromapprovingspecialeffectsforthecomingCarsicetourtohelpingdesigntheme parkattractions. Healsohasnewcorporateresponsibilities,fromschmoozingwithimportantinvestorstohelpingto pushDisneyseffortswithhighdefinitionBlurayDVDs.Allofthisjuggling,somepeoplesay,has madehimsomewhatinaccessible.OnePixarinsider,whorequestedanonymitybecausehewasnot authorizedbythecompanytospeak,jokedthatschedulingameetingwithMr.Lasseterhasbecome harderthanliningupachatwiththepope. Mr.Lasseter,speakingbycellphoneduringacommutehome,said:Thetoughestpartofmyjobis probablyjustmanagingmyschedule.ButIthinkeverythingisgoingprettywell.Headdedthat therehavebeentimesinthepastsuchaswhenhewasdirectingCarsthathiswalk aroundtimeatPixarwaslimited.Itebbsandflows,hesaid. FORnow,attentionisfocusedonWallE.DirectedandwrittenbyAndrewStanton,thecreative forcebehindFindingNemo,thepicturetellsthestoryofacuddlytrashcompactingrobotwho livesonanabandoned,heavilypollutedEarth700yearsinthefuture.Hissidekickisaperky cockroachnamedHal. WallE,whichfeatureslongsequenceswithoutdialogue,isunderextrapressuretoperformatthe boxofficebecauseofsoftinitialreceiptsforarecentDisneyfilm,TheChroniclesofNarnia: PrinceCaspian.AddingtotheweightarePixarslastthreefilms;thoughallwereblockbusters, theyhavegraduallytrendeddownwardatthedomesticboxoffice.Areversalwouldquietcritics whosaythestudiosbestdaysarebehindit.(Disneynotesthatanincreaseinforeignboxoffice saleshasoffsettheslide.) AswithCars,DisneyiscountingonWallE,setforreleaseonJune27,totakeoffwithatough crowd:littleboys.Ithaspreparedacollectionof300robotthemedconsumerproductsthatwill arriveonstoreshelvesoverthenextmonth.

Therearesomegreattoys,andweareworkingonavarietyofpotentialapplicationsforourparks, saidMr.IgerinaconferencecallwithanalystsonMay6.Sowearepoisedtotakeadvantageof broadanddeepsuccesswhenitcomes. (HeaddedthathehasparticularlyhighhopesforaWallEremotecontrolledrobot.Having playedwithit,IthinkitsgoingtobeahotsellerforChristmas,hesaid.) WallStreet,whichcloselymonitorsmajoranimatedmoviesbecauseoftheirhugecost,isnotyet soldontherobot,whichwasbeencriticizedbysomeaslookingtoomuchlikethestarofthecorny 1986filmShortCircuit. IcanseehowitcouldworkandbehugeandIcanseehowitcouldnot,saidRichardGreenfield, ananalystatPaliResearch. Bycontrast,thecompetingDreamWorksAnimationhasreceivedapplauseforitscomingKungFu Panda,featuringthevocaltalentsofJackBlackandAngelinaJolie.IngridChung,amediaanalyst atGoldmanSachs,saidrecentlythatshefoundthefilmsconceptandexecutionstrongenoughto createafranchise.WhenitcametoPixar,Ms.Chungdeclinedtocomment. DetractorsmightrecallthatRoadRunnerandWileE.Coyote,twoofthemostbelovedcartoon charactersofalltime,neverutteredawordtoeachother.Andmovietheaterexecutives,typically toughtoplease,reactedwithrobustlaughterandapplauseduringa30minutepeekatWallEin April. ItssomeofthebestworkIveeverseen,saidMr.Catmull,standingintheaisleofthetheater afterwardasconfettisprinkledfromtheceiling.Iamconfidentitwillbethenextsuccessstoryfor DisneyandPixar.