Troy Wolverton

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Martha Stewart Out as CEO and Chairwoman

06/04/03 - 08:53 PM EDT

MSO

Troy Wolverton

"She's going to be a hot potato for a while," Geffner said.

And that's assuming she doesn't end up in prison. The criminal charges Stewart faces carry a three-year minimum sentence, noted Taube, who also is a former enforcement official with the SEC.

"Martha Stewart is that company's intellectual property and you can't bank that from prison," Taube said.

The problem for the company is that it's in something close to a no-win situation, said one fund manager, who asked to remain anonymous. Even with Stewart, the company has lost money the last two quarters. And with the charges filed against her, the company's situation isn't likely to improve anytime soon, said the fund manager, a longtime observer of Martha Stewart Living.

Already, advertisers are reassessing whether they want to run ads in Martha Stewart Living's magazines, the fund manager said. The company soon may have to start worrying about whether its audience will be turned off by the scandal as well. And while the trial unfolds, the company risks losing much of its talent to rival companies, the fund manager said.

"It's abundantly clear that things have eroded in spectacular fashion," said the fund manager, who does not have a stake in Martha Stewart Living. And don't expect things to turn around even if Stewart is cleared of all charges and stays at the company, the fund manager said.

"Even in a best-case scenario, it's dubious whether this company can turn a profit."

The dilemma facing Martha Stewart Living is that without Stewart, there's not much left of the company, said the fund manager. Stewart's persona is the underpinning for nearly all of the company's business, from its magazines to its television specials to its Martha Stewart-branded products.

Staff Reporter Bill Snyder contributed to this report.

Troy Wolverton



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