Industry Standard Magazine Bankrupt
By Michael Liedtke
AP Business Writer
Thursday, Aug. 16, 2001; 9:00 p.m. EDT SAN FRANCISCO Sinking along with the Internet economy that it covered, the Industry Standard will suspend publication next week and file for Chapter 11 bankruptcy protection, according to an internal company memo obtained Thursday by The Associated Press.
The San Francisco-based weekly magazine's 150 employees will receive the bad news Monday when they return from a week of forced vacation, according to sources familiar with the plan. About six employees will be retained to continue running the Standard's Web site and report on the technology industry, the sources said.
If it can reorganize its finances under the court's supervision, the Standard hopes to revive the magazine, sources said.
Boston-based International Data Group, the Standard's majority owner, declined to comment Thursday.
The memo from Standard Media International's investors and board of directors blamed the 3-year-old magazine's failure on a deep technology industry slump that has resulted in mass layoffs and drastic cutbacks. With few buyers in the market, companies reduced their advertising budgets, which hit the magazine hard.
After raking in $140 million in revenue last year, the Standard is on pace for $40 million this year, a drop-off of more than 70 percent, the memo said.
"The company's 'vital signs' have been dropping precipitously in the face of a severe correction in the overall market," the memo said.
This year's dramatic reversal in fortune came on the heels of an aggressive expansion last year that included a long-term lease for expensive office space that would accommodate more than 600 employees. The payroll climbed to about 400 workers last fall when advertising revenue began to fall, prompting management to begin backpedaling.
Despite a series of cost-cutting measures adopted since the dot-com downturn, the Standard couldn't shed enough expenses to stay alive, the memo said.
In the past year, the Standard has lost more than $50 million, the memo said. After striking out in its last-ditch attempts to raise $10 million from venture capitalists and other investors this week, the Standard's board decided to go the bankruptcy route, sources said.
The bankruptcy petition will likely list more than $50 million in liabilities, sources said, a stunning reversal from early 2000 when the magazine was valued at $200 million during a $30 million round of financing from investors led by Flatiron Partners and Chase Capital Partners.
Bulging with snazzy ads proclaiming how the technology industry would change the world, the Standard became a benchmark for the dot-com industry. As it covered the rise of unprofitable Internet companies that became Wall Street darlings, the Standard joined in the celebration with fancy parties and elaborate technology conferences.
With a staff of business journalists plucked from well-established publications around the country, the Standard became perhaps the best-known of the flashy magazines to crop up in the San Francisco Bay area.
The Standard isn't the first of its breed to cash in its chips.
In June, Business 2.0's parent company sold the magazine for a reported $68 million to AOL Time Warner, which transferred the name to its eCompany magazine. Other prominent New Economy magazines such as Red Herring and Upside have been dumping workers and searching for cash infusions.
On The Net:
© Copyright 2001 The Associated Press