HEY, MICKEY: BUZZ OFF!

A key element in a pixar film is the sometimes contentious but ultimately triumphant bond between two great friends. Buzz and Woody. Sulley and Mike. Marlin and Dory. The same cannot be said of Steve and Michael. The relationship between Pixar CEO Steve Jobs and Disney head Michael Eisner began beautifully, with a 1991 deal that, after the groundbreaking success of "Toy Story," morphed into a five-picture arrangement in which Disney became a 50-50 partner with the upstart northern California studio. As Pixar's computer-graphic (CG) films busted blocks, Disney's traditional animated flicks flopped, and tensions grew between the two headstrong execs. But as time came for renegotiations, most of Hollywood assumed a "Casablanca"-style arm-in-arm fadeout. Why break up a good thing?

So it came as a shock last Thursday when Jobs told Disney Studios chairman Dick Cook that the talks were over. "After 10 months of trying to strike a deal with Disney, we're moving on," Jobs said in a statement. "It's a shame that Disney won't be participating in Pixar's future successes."

From Pixar's point of view, though, it's a shame that the company is still obligated to hand over two more movies: "The Incredibles" (about a family of superheroes), out in November, and "Cars" (CG superstar John Lasseter's return to directing), in 2005. And an even bigger shame that Disney has the right to produce sequels for any of the movies (after offering Pixar the opportunity). Jobs can't be looking forward to a series of straight-to-DVD sequels... Monsters Re- inked...Nemo Goes Hawaiian...TheNeverendingToy Story. Expect the voice talents to devolve from Ellen DeGeneres to Nicole Richie. Significantly, Disney animation head David Stainton made his bones by churning out low-cost sequels that appalled critics but satisfied the pacifier set.

In fact, Disney's supposed edge in winning a new contract was its exclusive ability to renegotiate its previous deal to give Pixar more profits and control over its library. Last spring, Eisner rang up Jobs and invited him to dinner. But even an Indian-food feast at a Bay Area restaurant couldn't thaw out the relationship. Jobs thought Pixar should fund and own its movies, and wanted a partner to distribute and market them for a fee, the way Fox does for George Lucas. But Eisner, who told NEWSWEEK last May that "we're not for rent for anybody," couldn't bring the company to agree to Jobs's bottom line. A source familiar with the negotiations says that Gordon Radley, the former Lucasfilm president who had been consulting with Pixar on the deal, urged Jobs as early as last fall to "draw a line in the sand" to counter Disney's "let's take lunch on it" procrastination. But by the time a fed-up Jobs drew that line last week, it was less in sand than in cement. "I think the negotiation is over," says an industry insider who knows both men well. "This is not a ploy."

The timing is awful for Eisner. Disgruntled former board member Roy Disney, nephew of the sainted Walt, is calling for his head, and the failure to hold on to Pixar is one more reason for critics to charge that Eisner can't work with others.

Pixar will have no trouble finding suitors: Sony, Warner Bros., Fox and Universal are candidates. But unless Jobs puts his refusal into turnaround and winds up going back to the Mouse House, he'll be finding Nemo and the others--recycled. No sooner was Jobs's memo issued than Eisner announced that Disney would be producing "Toy Story 3." Nicole Richie, call your agent.