Martha Stewart Out as CEO and Chairwoman

Martha Stewart Living possibly could try to carve out a niche for itself offering something similar to its current line of products and magazines but without the "Martha Stewart" label, the fund manager said. But the audience for that would be far smaller than the company's current audience. And positioning Martha Stewart Living to cater to that smaller audience would involve a wrenching transition, involving mass layoffs, steep cutbacks and creating some kind of new image or persona to embody the company's ideals, the fund manager said.

"This organization may have an impossible time making that transition," said the fund manager. "You're probably better off starting such an entity from scratch."