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Penton shuts ‘Internet World,’ shores up finances

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Internet World is no longer of this world.

Penton Media Inc. announced last month that it would discontinue the U.S. print version of the publication with the June issue. It will still operate print versions in the U.K. and Germany, as well as the Internet World Web site in the U.S.

"It pains my heart," said Alan Meckler, chairman-CEO of JupiterMedia Corp., who founded Internet World in 1990 and sold it to Penton in 1998 as part of the $274 million Mecklermedia deal.

Shutting down the magazine, however, may have been even harder for Thomas Kemp, Penton chairman-CEO; Daniel Ramella, president-COO; and the rest of Penton’s management team. "It was no more difficult than any of the other moves we’ve made, but it’s been a difficult process," Ramella said.

Robert Crosland, managing director of media investment bank AdMedia Partners Inc., said, "It’s tough to walk away from something you’ve got millions and millions of dollars sunk into."

Difficult choices for Kemp

Internet World’s closure is the latest in a host of difficult choices that Kemp and his management team have faced since the b-to-b advertising market recession began in late 2000.

"I think they’ve done pretty well in this market in terms of the cards they’ve been dealt the past couple of years," said Hal Greenberg, managing director of media investment bank Veronis Suhler Stevenson.

"They’ve really made some heroic changes in their management of operations," Crosland agreed. "It’s not a question of whether they should have been in these positions in the first place, but once they were in these positions, they’ve really done some pretty remarkable things."

Penton’s approach focused on creating liquidity for the company by shoring up its balance sheet, excising money-losing properties and cutting costs. With a heavy debt load (created in part by its purchase of Mecklermedia), Penton was particularly vulnerable to a downturn in advertising revenues. Its long-term liabilities stand at $355.3 million, according to its most recent 10-Q filing with the Securities and Exchange Commission, but the company has moved much of its debt away from banks to bond holders with less restrictive cash-flow covenants, Ramella said.

Financial moves pay off

Another move that paid off was selling several struggling properties, including Boardwatch (sold at a loss in December), helping to secure a $52.7 million tax refund. Penton also booked a $50 million cash infusion in 2002, with investments from ABRY Partners and Sandler Capital Management. In addition, Penton’s management has cut costs by slashing 716 positions and closing nearly 30 offices since the beginning of 2001.

The efforts have borne fruit. Although Penton’s revenues dropped from $61.2 million in the first quarter of 2002 to $54.4 million in the same period this year, its EBITDA (earnings before interest, taxes, depreciation and amortization) rose to $14.1 million from $11.8 million in the same time frame.

"We know we can’t save our way to prosperity," Ramella said.

The company needs its markets to bounce back and its properties to grow organically. While its manufacturing and technology segments have struggled as those markets strained under lingering downturns, Penton’s natural foods segment—which was created through the acquisition of New Hope Communications Inc. and its Natural Product Expo trade shows in 1999—has provided organic growth.

Despite such positives, Penton still faces losing its listing on the New York Stock Exchange because its share price remains under $1 and its market capitalization is below the minimum level.

Meanwhile, Penton is looking to the future. Earlier this month, it launched Business Performance Management, a quarterly publication that covers how corporations have integrated various parts of their operations, ranging from business intelligence to budgeting and forecasting.

Business Performance Management sold all 16 ad pages in its first issue to Hyperion Solutions Corp. The business software company used some pages for its own ads and offered the rest to its partners, such as IBM Corp., Bearing Point and Accenture.

Now the questions facing Penton are: When is the recovery coming? And how robust will it be?

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