Back from financial brink, Ziff Davis logs solid results

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Ziff Davis Media has made the tough moves that industry observers say put the technology publisher in a solid position for a financial turnaround. Now all Ziff needs is an assist from the economy—a long shot in these uncertain times.

Still, the b-to-b publisher is in much better shape now than it was at this time last year, when serious questions arose about whether Ziff—hemorrhaging badly from its exposure in the technology markets—could survive the ad recession.

Ziff was able to hammer out a financial restructuring plan approved by its bondholders in August 2002. It shuttered several Web-related publications, including the once high-flying Yahoo! Internet Life, Ziff Davis Smart Business, The Net Economy and Interactive Week. The company pared its staff to about 400 from 1,100.

The changes, made under Ziff President-CEO Bob Callahan, who took charge in October 2001, appear to have paid off. Late last month, Ziff reported its best quarterly results in two years, with earnings before interest, taxes, depreciation and amortization (EBITDA) of $13.1 million for the fourth quarter of 2002, compared with a $4.5 million EBITDA loss in the year-earlier quarter. EBITDA for all of 2002 totaled $8 million, compared with a loss of $44.3 million in 2001.

Still a player

"They’re definitely in the game after being nearly run out of the arena," said Bob Crosland, managing director of media investment bank AdMedia Partners Inc. "They’ve done about everything they can do. They’ve gotten rid of the money losers and have restructured. But, sooner or later, they’re going to need a lift from the marketplace, just like all these b-to-b companies that have gotten smacked around. …The market will determine the future."

Roland DeSilva, managing partner in media investment bank DeSilva & Phillips, praised Ziff’s moves. "Management has done a Herculean job of managing costs the last 18 months," he said.

DeSilva added that Ziff titles such as Baseline and CIO Insight are primed to capitalize on the upgrades in computer systems that companies will have to make. "A lot of the systems are obsolete and will need to be replaced. And that puts the company in a great position," he said.

Baseline had 148 ad pages in 2002, up from 115 in 2001, while CIO Insight had 152 ad pages last year compared with 96 in 2001.

The publisher’s revenue fell slightly to $56.3 million in the fourth quarter of 2002, from $55.9 million in the fourth quarter of 2001. The company is still facing $301 million in debt but has $41 million in cash.

"We’ve got plenty of cash on hand," said Callahan, who would not rule out acquiring additional media properties, in addition to growing organically in the months ahead. "I’m very conservative fiscally, but I am looking to expand our share in the tech and gaming markets."

Wilma Jordan, CEO of media investment bank Jordan Edmiston Group Inc., said Ziff is poised for growth and that a little push from the economy would help. "[Management] is getting the company to a point where [owner Willis Stein & Partners] will be able to exit in a couple of years."

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