PlanetOut of Control

Back in April, the saucy blog Queerty snooped out the first warning signs from financial news reports. In its article, PlanetOut Going Down faster Than Mark Foley on a Senate Page, it states:

Down on page 15 of their 2006 SEC filing, PlanetOut can't keep up the charade any longer and just admits it:

"We have a history of significant losses," they declare, outlining a litany of past failures and the myriad events that could lead to the company going out of business altogether. "If we do not regain and sustain profitability," the filing continues, "our financial condition and stock price could suffer."

Well, it did. And it continues to suffer. As the largest owner of gay media in America—their trading symbol is "LGBT" for crying out loud—one has to wonder what the consequences would be if PlanetOut (and all its subsidiaries: Gay.com, PlanetOut.com, Advocate.com, Out.com. The Advocate, Out, Out Traveler, HIVPlus, et.al.) was suddenly no more.

What's that? You say you're shocked to find Queerty knows its way around an SEC filing? Well, hold onto your chiseled asses, then, boys, because you're going to be downright shocked when you read what John Carney of Dealbreaker said when we asked if he could give us a true pro's opinion on the reasons behind PlanetOut's ongoing 12-month decline...

Here's how John put it:

"All stock prices move because of the aggregate effect of buying and selling of investors and traders on stock exchanges. That's the universal DealBreaker answer to all these kind of questions because we're not stock analysts and we're very short post-hoc explanations of stock and market movements. "Short" is Wall Street speak for "we don't believe it works.

But we've never let our lack of expertise get in the way of sharing our opinions before so we won't start here. PlanetOut has a chart that's almost painful to look at. It's slid from highs a couple of years back around twelve bucks down to Vonage territory. The company has been chopped-down by Wall Street analysts, who have noted declining revenues from ads and travel biz. Mounting debt and insider sale last year probably don't help. It's not clear what the companies core business is. Is it a publishing company? A travel site? A web 2.0 portal? Investors don't like companies when they can't tell what it's supposed to be doing.

To make matters worse, at start of the year PlanetOut adopted a "Shareholder's Rights Plan" which is the phrase companies use to describe something better known as a poison pill. Basically, it's a device that prevents an outside shareholder from acquiring the company without the consent of the insiders. These things hold down stock prices because they make acquisitions less likely and discourage outsiders from acquiring substantial portions of the company. No one has ever successfully swallowed a poison pill."

Then, CNBC caught up on this news in PlanetOut Dives in Widened First Quarter Loss.

Shares of media company PlanetOut Inc., which creates media and entertainment for the gay and lesbian market, plunged to an all-time low Thursday after the company said its first-quarter loss widened on decreased sales and higher operating costs.

PlanetOut shares fell 63 cents, or 25.3 percent, to $1.86 in afternoon trading. Earlier, shares traded as low as $1.45, well below their 52-week low of $2.38.

Late Wednesday, PlanetOut reported its first-quarter loss totaled $6.9 million, or 39 cents per share, compared with a loss of $132,000, or a penny per share, in the same period last year. On an adjusted basis, the company recorded a loss of $6.6 million, or 38 cents per share, in the recent quarter.

The company's quarterly revenue declined to $16.8 million from $17.6 million in the year-ago quarter.

Operating costs grew to $23.3 million from $17.7 million in the year-ago period, as revenue costs grew to $12.3 million from $9.4 million.

The company also lowered its full-year revenue outlook to between $70 million and $75 million, with an adjusted loss of $700,000 to $900,000. In February, PlanetOut forecast 2007 sales of $75 million to $80 million, with adjusted income of up to $2 million.

In a note to clients Thursday, Roth Capital Partners analyst Richard Ingrassia wrote the company's results were disappointing, and that the company "remains a work in progress."

"Management believes it will now take 12 to 24 months to complete the turnaround," he wrote.

Ingrassia rates the stock "Buy" with a $6 price target.

Today, The San Francisco Chronicle caught up, and repeated the bad news in Cash Crisis Closing in on PlanetOut:

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.

Look for a Bay Area Reporter article out on Thursday.

You can keep up on this downward trend at Yahoo's Financial Stock News.

One Queerty comment states:

PNO could have been something if it weren't for the politics and the egos of upper management that made decisions based solely on what would look good to others, or add to their resume. The worst part is that while all of this was going on, there were/are some truly talented and committed people who worked long hours and made sacrifices in salary and career to be a part of something that 'could have been'.

Well, call me Cassandra.

Seven years ago, when the initial merger of PlanetOut and Gay.com was imminent, I was quoted in an article "Gay Monopoly in Cyberspace about it:

One backdrop to the PlanetOut debate is the debacle of Australia's Satellite Group, a gay media and real estate company that went public last year, only to end up in receivership with seven gay publications shuttered. To someone like Jim Provenzano of San Francisco, a freelance writer and former PlanetOut staffer, the lesson of Satellite is that one company should not control so many publications.

"The collapse of Australia's gay media may serve as a harbinger of the media blackout that could happen if financial truths are belatedly faced by the U.S. version," Provenzano said.

To [CEO Megan] Smith at PlanetOut, however, Satellite's failure proves just the opposite: "We have no desire to go the way of Satellite media in Australia. We want to make a strong, profitable company."

Well, neither Megan nor I work for them anymore, and that dream of a profit never happened.

A little history: I wrote for The Advocate in the early 1990s, when it was making money, then again a few times in 2000.

I worked at the SF-based www.gay.net before it merged with the NY-chat-focused www.gay.com. This was in 1997-1998.

In 2000, I worked for less than six months for PlanetOut, which had moved to a big warehouse space on Harrison.

On my first bike ride to work, I was doored by a car, actually a City-owned car driven by an employee of the SF Mental Health Services. That should have been a warning.

As with the very unpleasant experience with www.gay.net, my boundless creativity was reigned in by uncreative, unimaginative and utterly dotcom-dopey superiors with little grasp of the LGBT community.

For gay.net, my ideas were trashed, ridiculed and only later stolen or accepted when my "co-producers" couldn't think up new ideas. A few coworkers with whom I had unpleasant relations were fired while I was in Amsterdam at Gay Games V in 1998.

For PlanetOut, I did get some good articles - Gay comics, homophobia in rap and hiphop, Gad Beck, a gay holocaust survivor - in between being basically forced to travel to the bloated Millennium March on Washington (where entire bags of cash went missing), its related Equality Rocks concert, and two GLAAD Awards.

Celebrity pap with no byline, interspersed with some good content, and all of this sprinkled with coworkers providing obtuse sexual harassment and persnickety backstabbing.



But the cherry on the PlanetOut cake was when PNO decided to sponsor World Pride Rome in July 2000. In its choice over which staff members were to go to Rome, they chose only senior staff members, none of whom could speak Italian. I and three others who could were not chosen to go.

One reporter got a translator hired for him. So, I took my well-deserved vacation time - a week- and went to Rome myself.

Bumping into a few executives -sent all expenses paid, with partners, of course- was fun enough. Telling off my boss's boss why I would not be returning to work for them - all in Italian- was more fun.

So, here we are, seven years later, and despite millions invested, and reinvested, the largest gay media conglomorate -my three-time former employer- is about to collapse like the ancient Roman empire.

That is, unless some naive and rich fool wants to pour another $15 million into a lumbering media hybrid that's doing exactly what sceptics -and no doubt a lot of other former employees– said it would.

Schadenfreude Sundae, anyone?