“It could be a situation where [Ziff Davis’] private-equity backers were just looking for a pound of flesh,” said Reed Phillips, a founding partner of media investment bank DeSilva & Phillips. “They’ve had a tough task of turning things around in the wake of the tech downturn and have a done a good job at stabilizing things. But the private-equity guys now want the company to show growth and better bottom-line results, so they’re putting more pressure on the management team.”
Ziff Davis confirmed Monday that Catalane is leaving at the end of this month, although he will remain on the company’s board of directors. Catalane joined Ziff Davis in 2001 as COO-CFO, after Bob Callahan was named CEO. His departure follows that of former Ziff Davis CFO Derek Irwin, who left last year to join VNU.
Bob Crosland, a managing director at media investment bank AdMedia Partners, was taken aback by the news about Catalane. “That really surprises me,” he said. “He has been Callahan’s right-hand man through several companies.”
Crossland added: “You never know if someone is throwing someone on the sword. It could mean that Bart wasn’t doing well with the numbers and [his departure] foreshadows larger changes. But it’s all speculation.”
Randy Zane, VP-corporate communications at Ziff Davis, said the company recently reorganized into three operating groups—consumer/small business, game and enterprise—each with its own president.
Catalane’s departure comes as Ziff Davis continues to struggle with declining print revenues, which fell 10% in the third quarter of last year compared with the same period in 2004. The decrease was primarily due to a decline in technology ad pages, which were off 10%, or 869 pages, in the third quarter compared with the year-earlier period. A 23% surge in online revenue helped to offset the decline in print revenue.
For the third quarter, the company reported EBITDA (earnings before interest, taxes, depreciation and amortization) of $1.5 million, down 77% from $6.5 million during the same period in 2004.
Revenue for the enterprise group, which includes eWeek, CIO Insight and Baseline, was flat compared with 2004, at $17.0 million. Revenue for the game group, whose properties include Electronic Gaming Monthly and Computer Gaming World, fell 19% to $9.1 million, from $11.2 million a year earlier. The declines in the game portfolio were attributed to the closing of GMR magazine in February 2005 and a suspension of publication of Xbox Nation in the fourth quarter of 2004. (Fourth quarter 2005 financial figures are due out shortly.)
Because the company anticipates continued softness in technology advertising, it has taken a pretax restructuring charge of $4 million to $6 million. Taking a restructuring charge is generally considered a precursor to layoffs.
Willis Stein bought Ziff Davis in 1999 for $780 million in cash and subsequently watched the company’s fortunes fall because of its heavy exposure to technology markets. Earlier this decade, the company was on the brink of bankruptcy, but Callahan was able to get significant concessions from the bondholders to keep it out of bankruptcy court.