Gay.com running out of money?
This is a sad bit of news. It's the first really "gay" publicly traded company and it looks like its being run straight into the ground...
Cash crisis closing in on PlanetOut
Owner of Gay.com, Advocate reports a dismal first quarter; seeks $15 million investment
Verne Kopytoff, Chronicle Staff Writer
Saturday, May 12, 2007
After becoming the dominant media company for the gay community, PlanetOut Inc. is now just trying to survive. The San Francisco owner of Gay.com, along with the Advocate and Out magazines, disclosed this week that it will run out of money before the end of the year without an infusion of cash.
The dire situation is a consequence of PlanetOut's declining subscriptions for personal ads, a shortfall in advertising revenue and trouble booking passengers on its gay-oriented cruises.
A dismal first-quarter earnings report on Wednesday hammered the reality home. Virtually every piece of the business needs fixing, according to management.
In the report, PlanetOut said it lost $6.9 million in its fiscal first quarter, compared with a $132,000 loss a year earlier. Revenue totaled $16.8 million, down from $17.6 million during the same period a year ago. Spooked by the results, investors sent PlanetOut's shares tumbling 33 percent over two days to close Friday at $1.64, the lowest point since the company's initial public offering three years ago.
"This is deeply disappointing and concerning to me and the rest of the management team," Karen Magee, PlanetOut's chief executive officer, said in a conference call with analysts Wednesday. "We've got major work to do at PlanetOut to generate the healthy revenue growth and solid earnings performance that I believe this company is capable of producing." Magee, who joined the company in 2006, described the problems as years in the making. A turnaround, she said, will take up to 24 months, during which the company plans to fix creaky technology, reorganize and sell some assets, including its adult publishing business.
Allen & Co., a consulting firm, has been hired to explore various options.
PlanetOut is under the gun to come up with an additional $15 million to meet the terms of an existing loan, or face default.
If it's unable to get the financing, the lender could foreclose on PlanetOut's assets, a potential death knell. The company, which had $11 million in cash and short-term investments at the end of the first quarter, said it would run out of money by year's end without additional financing.
Magee laid part of the blame for PlanetOut's poor performance on its RSVP travel agency, which offers cruises to destinations such as the Caribbean. Passenger occupancy has been less than expected and, as a result, the company has had to offer steep discounts to attract travelers and pay penalties to cruise lines.
Separately, PlanetOut's advertising sales, both online and in print, have been disappointing. Subscriptions to online personals have also lagged amid growing competition from other gay-oriented Web sites in addition to social networking giants MySpace and Facebook. In a note to investors, Richard Ingrassia, an analyst for Roth Capital Partners, said it's possible that PlanetOut would sell its travel business. Overall, he said, the company is still unchallenged in terms of reaching the gay demographic.
