'FORTUNE' IS DEFINITELY SEXY, BUT BIZ BOOK IS NOT STUPID - BEST MAGAZINE: HUEY CAPTURES THE COLOR AND THE SUBSTANCE OF THE BUSINESS WORLD, AND IT PAYS OFF

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In the four years since Fortune's Managing Editor John Huey took the helm of the Time Inc. title, the publication has become the most provocative in its category. And readers and advertisers are responding.

"Obviously, it all starts with the editorial, and they have a stellar group over there," says Keith Ferrazzi, chief marketing officer of Deloitte & Touche Consulting Group, which increased its business with Fortune in 1998. "They have individuals who really know how to speak in business language."

ATYPICAL OF GENRE

Fortune delivers lively writing and sharp visuals -- atypical of its genre. The University of Missouri School of Journalism, which just named Fortune one of the "25 Best Magazines in America," notes it "covers business with seriousness, style and even humor when appropriate."

Color, too. A curse word is as common in its pages as a stock history. Stories on e-commerce and workplace diversity run side-by-side with a profile on Brunei's ruling family and a Stanley Bing humor column titled "20 Things I Really Like About L.A."

One cover features a celebrated CEO -- Microsoft's Bill Gates or The Gap's Mickey Drexler -- while the next has supermodel Claudia Schiffer in a sultry pose or financier Michael Price's looming head alongside the line, "The Scariest S.O.B. on Wall Street."

CIRCUS BARKER

"I am a bit of a self-promoting circus barker," Mr. Huey admits. "But what you have to weigh into that is that in the magazine business, unlike the newspaper business, [you have to] promote your product. People don't just go to the newsstand every day to buy your magazine like they do the Wall Street Journal or The New York Times. What you put on the front page of the Wall Street Journal doesn't affect its sales day-to-day."

Mr. Huey, honored by Advertising Age as an Editor of the Year for 1996, has led the charge against McGraw-Hill Cos.' Business Week and the privately held Forbes by consistently serving up provocative, first-rate reporting of such high-profile and increasingly important industries as technology, media, entertainment, fashion and sports.

NOT LIGHTER FARE

In fact, the Boston Globe recently named him one of the best business editors in the U.S. and observed he "transformed Fortune from the most boring business publication in America to the most compelling."

But Mr. Huey bristles at the notion that Fortune's irreverence makes it lighter fare than a BW or Wall Street Journal.

"It is true we have a more cinematic approach to business journalism, but it is not in any way true that we are less thoughtful or sophisticated about business," Mr. Huey says. "It's like saying because we're pretty, we're stupid."

Advertisers clearly like Mr. Huey's plan. In 1998, Fortune saw gains in seven of its 10 largest categories in terms of ad pages, whereas Business Week and Forbes each had page increases in just five of their top 10 categories.

REPOSITIONING EFFORT

"They've done a nice job repositioning themselves with topical articles and a fresh, progressive look to the book," says Steve Sturm, a VP-sales and marketing with Toyota Motor Sales USA, a key advertiser in the publication.

"John Huey has done a phenomenal job of changing the focus of the book from just pure management to thought-provoking ideas," adds Carol Karpa, president of KDM International, New York, whose clients include ITT Corp., Credit Suisse First Boston and Goldman Sachs & Co.

STRONGER GROWTH

While Fortune trailed its two major rivals in advertising pages in 1998, it by far enjoyed the greatest year-to-year overall growth, according to the Publishers Information Bureau. Fortune sold 3,898.59 pages, a strong 8.3% increase. Forbes led the category, with 4,733 pages, up 1.5%, while Business Week had 4,167 pages, a 1.3% improvement. Fortune says its year-to-date 1999 ad pages are running better than 30% ahead of the same period last year.

Computers/software continued to be the publication's strongest advertising category last year, with 779 pages, although Fortune saw a slight 0.1% dip from 1997, according to PIB.

The next-largest categories were financial (up 4%, with 521 pages), automotive (up 2.7%, to 450 pages) and telecommunications (up 37.2%, to 304 pages).

Fortune along with the rest of the business publication category has benefitted from a massive increase in spending by advertisers in the technology category -- at the expense of technical and computer titles.

"They've figured out how to sell to us," says Ellen Freeman, president of Carat Freeman, New York, which represents such major tech names as America Online, Radio Shack, Analog Devices and Platinum Technology. "They don't just come in with their Simmons figures. They really understand what drives a tech purchase, how their audience buys and uses technology, and they've made a great editorial commitment to technology. Fortune is in business to make money, and they wouldn't be increasing their tech coverage if readers were not responding to it."

Fortune also is attracting fashion advertisers such as Polo Ralph Lauren, Tommy Hilfiger and Perry Ellis.

Motorola, Honeywell, SAS Institute, PeopleSoft and the international consultancy firm Watson Wyatt Worldwide signed on as advertisers in 1998.

HEALTHY CIRC LEVELS

Subscription and newsstand price hikes in late 1997 don't appear to have made a dent in Fortune's healthy circulation levels. Last year, in fact, the publication experienced the most circulation growth among the three largest business titles, although everyone's reach was relatively flat.

Fortune -- which raised its long-steady North American rate base of 740,000 to 775,000 on Jan. 1 -- saw second-half North American circulation up 2.1% to 781,883. International circulation rose 12.5% to 145,461. North American subscriptions are up 0.6% to 703,763. North American newsstand are up 18.2% to 78,120. Over the last four years, newsstand sales have grown an eye-popping 63.2%.

Fortune boasts the youngest median readership (41 years) and highest median household income ($80,230) of its competitors, according to MRI Research figures.

The magazine has even further extended its reach and influence with a number of ancillary ventures, including editions in the Far East, Europe and Latin America, investor guides, conferences and cross-media forays -- most notably, the "Newsstand" partnership with sister news organization CNN.

"Personally I think they are terrific for the magazine. The scary thing is that they are totally out of our control. Once it's shipped out of here, it's their editorial product, but for the most part ['Newsstand' is] great because they reinforce the quality journalism at Fortune," says Publisher Jolene Sykes.

CONFERENCES MAKE IMPACT

According to Ms. Sykes, the conferences are not huge in revenue terms but are profitable. One plus for the publication is that Fortune reporters can attend the conferences and gain access to top CEOs.

Ad page growth, strong circulation and branding opportunities are all well and good, but Ms. Sykes says she has her eye on the bottom line.

Ms. Sykes -- who came to Fortune three years ago from Time Inc.'s Sports Illustrated -- says Chairman-CEO Don Logan "couldn't care less about pages -- it's all about profitability."

PROFITS UP

The magazine is making money. Fortune's profits last year grew by $28 million, compared with a $27 million increase in 1997 and a $20 million gain in 1996, according to the publisher.

A sizable chunk of Fortune's profit has been invested in editorial operations. Mr. Huey has aggressively expanded the Silicon Valley bureau, recently luring award-winning technology writer Eric Nee away from Forbes. When Fortune tech reporter David Kirkpatrick considered bolting for upstart Red Herring, Fortune reportedly changed his mind with a $200,000 offer.

A fashion-industry reporter was recently recruited, and new columns on money management, Internet investing and tech products were added.

FASHION AS BIG BUSINESS

The magazine that gave the world the Fortune 500 hopes to score with new editorial franchises, including "The Most Powerful Women in American Business."

Some recent editorial choices have put the magazine in hot water. The New York Times and others raised questions about Fortune's glowing cover story on Time Inc. parent Time Warner.

Even more controversial was Fortune's flagellation of Conde Nast Publications President-CEO Steven T. Florio.

'RIGHT NOW, WE'RE WINNING'

Mr. Huey stands by that story, which generated a lot of buzz, despite some industry protests it amounted to character assassination.

And Mr. Huey is convinced he's on the right track by devoting ink to the magazine, fashion, sports and entertainment industries.

"We're not smug," he says. "We don't think what we're doing is unassailable or

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