Playboy Enterprises all ears to sale, reorganization ideas

Quarterly net loss widens to $145.7 million on falling revenue

By Greg Burns | Tribune correspondent

February 19, 2009

The interim boss of Playboy Enterprises Inc. told Wall Street analysts Wednesday that he will listen to ideas for the sale or reorganization of the Chicago-based media company in the wake of a big fourth-quarter loss.

Asked about the prospects for dramatic action to boost the company's value, interim Chief Executive Jerome Kern said, "We are willing to listen." It was his first conference call with analysts since longtime Playboy CEO Christie Hefner departed last month.

Playboy shares inched higher Wednesday, closing up 5 cents, at $1.55, giving it a market capitalization of barely $51 million.

Kern's statement about listening to offers "was a bit surprising," said analyst Steve Marascia of Anderson & Strudwick. "They have downplayed the idea of getting acquired."

Any deal would need the support of 82-year-old Playboy founder Hugh Hefner, who retains a controlling stake, and Marascia said the company is more likely to try engineering a turnaround than to sell.

"You've got to be able to generate higher cash flows from the assets you've got," he said.

Kern's remarks came after Playboy reported a fourth-quarter loss of $145.7 million on falling revenue, down from a $1.1 million loss in the year-ago quarter. The company took non-cash charges of $146.4 million, mostly to write down television properties acquired in the late 1990s.

The financial performance fails to reflect the "potential" of Playboy's "unique, globally popular brand," Kern said. He also pledged to continue cutting costs. Playboy had cut its workforce to 714 as of Dec. 31, down 112 in a year, and it is reducing overhead by moving its flagship magazine's editorial staff to Chicago from New York.

The magazine is losing circulation, and free Internet content is replacing its paid videos. The licensing of Playboy's name and rabbit-head logo is feeling the global recession too: Licensing income fell to $4.3 million in the fourth quarter from $6.9 million a year earlier.

gburns@tribune.com