May 24, 2007

PlanetOut faces deepening financial crisis (Company chartering the QM2)

Another story about how the charter of the QM2 (Queen Mary 2) for a gay crossing was a bad idea for this company costing them at least $700 000..this from the

"There will be no shortage of partying aboard the Queen Mary 2 next week when it leaves New York.

Passengers aboard the trans-Atlantic gay cruise can sip Champagne at the Royal Ascot Ball, mingle with leather-clad men on the aft deck and see Margaret Cho perform in the ship’s Royal Court Theatre.

But when the revelry hosted by RSVP Productions ends, company officials must face a sobering reality.

PlanetOut, the parent company of RSVP and many other gay businesses, lost $6.9 million in the fiscal quarter that ended March 31.

A federal filing released earlier this month showed falling revenues and rising costs have destabilized the corporation that also owns, plus the Advocate and Out magazines.

Compared to the first quarter last year, total revenue at PlanetOut fell 5 percent to $16.8 million, while operating costs rose 32 percent to $23.2 million.

“Those are all signs of a company that is having serious issues, to put it mildly,” said James Angel, a Georgetown University finance professor.

Stockholders who once recorded the company’s value at more than $10 a share saw PlanetOut stock close Monday for the first time at less than $1.

“It’s a penny stock now,” said George Kresslein, a certified public accountant who is gay and works in Annandale, Va. “They’re in really bad shape.”

In a May 9 conference call, Karen Magee, PlanetOut’s chief executive officer, said she’s working to turn things around, but “it will take at least 12 to 24 months” to complete the task.

Business experts said company officials must move faster, though, to overcome mounting pressures.

“They don’t have that kind of time,” Kresslein said. “If they don’t turn it around in the next few months, there’s not going to be a PlanetOut.”

Among the three segments that PlanetOut operates, two were profitable during the first quarter.

The online and publishing segments, which include and Out among other ventures, respectively added $970,000 and $435,000 to the company’s bottom line.

But those contributions could not counter the losses incurred by the company’s travel and events segment. The arm that includes RSVP, which the company bills as its traveling and events marketing brand, posted a $1.7 million loss, including $700,000 in expenses associated with the Queen Mary 2 cruise ship. Other company losses stemmed from general operational expenses.

The quarterly results have some business experts questioning whether RSVP is a liability for PlanetOut.

“It forces you to ask the question: Are they a media company? Are they a travel company?” said Wesley Combs, a marketing specialist and president of Witeck-Combs Communications in Washington.

“I think that is the question that management appears to be trying to figure out. And one of the options that have to be considered is: Does RSVP make sense to be one of those assets?”

PlanetOut acquired RSVP in March 2006 for $6.5 million. The move, touted as complimentary to the company’s Out Traveler magazine, is one that Combs said failed to work as planned.

“There was some thought that there was some synergy between the ability to leverage the gay travel business with the advertising channels in a way that they could cross promote one through the other,” he said. “I guess that doesn’t seem to have proven to be as successful or as productive as they’ve hoped.”

Daniel Miller, PlanetOut’s chief financial officer, acknowledges that the company’s travel segment has weighed down the quarterly results, but he would not specify how those losses, or those stemming from the general operational expenses, might be reduced to help make the company profitable.

“At the moment,” he said, “we’re doing all we can to turn around the financial performance.

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