Updated from 4:48 p.m. EST

The guilty verdicts against Martha Stewart and her stockbroker could prove a mortal blow to her namesake company.

For more than a year -- since allegations first surfaced that Stewart engaged in an illicit stock trade and lied to cover it up -- Martha Stewart Living ( MSO) has struggled to retain advertisers, subscribers and viewers. The company's bulls had bet that the charges against Stewart were weak and that those groups would return once she beat the rap. Now that she hasn't, the company's decline in advertising and subscription revenue may only accelerate.

"The thing that's most damaging to Martha Stewart and her company is the idea of a loss of credibility, the loss of trust," said Kim Cameron, a professor of organization and management at the University of Michigan's school of business.

Recovering that integrity will take the company a long time, if it can do it at all, Cameron said. "The company will continue to be marginalized," he said.

After a trading halt immediately following the verdict, Martha Stewart Living shares closed Friday's session down $3.17, or 22.6%, to $10.86. Intraday, the stock traded at a 52-week high of $17 as short-sellers covered their positions and other investors wrongly bet the verdict would go in Stewart's favor.

An NYSE official said the exchange couldn't halt trading in the stock until it received official confirmation from the court that a verdit was imminent. The official explained news reports of a possible verdict were not enough to halt trading.

In a statement, Martha Stewart Living said it was saddened by the verdict but said its board would meet "promptly" to react to it. On a conference call Thursday, company officials said they had contingency plans in place depending on the outcome of Stewart's trial.

In its statement on Friday, the company again stressed that its assets, including $169 million in cash and short investments, would see it through its current troubles.

"We are confident that our assets are more than sufficient to continue MSO's development as a leading 'how to' brand-building company," the company said.

Stewart was convicted on Friday of all four counts facing her, including obstruction of justice. The jury convicted her stockbroker, Peter Bacanovic, on four of the five charges facing him.

The charges stemmed from Stewart's sale of shares of ImClone Systems one day before the drug company's stock plunged due to a regulatory setback. Prosecutors charged that Stewart made the trade after getting an illicit tip, then lied to cover it up.

Stewart theoretically faces up to 20 years in prison as a result of the verdict. However, court experts speculate that she will receive a far more lenient sentence. A hearing on her sentencing is scheduled for June 17.

Stewart and Bacanovic's lawyers said they plan to appeal the decision. But even if the verdict is ultimately overturned, Stewart's company could be in for a long period of trouble.

From One Uncertainty to Another

Much of the problem the company has faced -- both in its stock price and in attracting advertisers -- has been due to the uncertainty surrounding Stewart's trial, said Jamelah Leddy, who covers Martha Stewart Living for McAdams Wright Ragen. Despite the verdict, that uncertainty continues, Leddy said. Martha's sentence is up in the air, the company hasn't laid out a specific plan for how it will react -- and no one knows yet what Stewart's readers and viewers will do.

"Advertisers would have come back in a positive resolution" to Stewart's trial, Leddy said. "Given that it's negative for Stewart , the company now has to prove to advertisers why they should come back. It's definitely going to be a difficult path." (Leddy owns shares of Martha Stewart Living, but McAdams Wright Ragen has no investment banking business with the company.)

The company's path was already difficult before the verdict.

Martha Stewart Living's bottom line fell into the red last year, marking the second straight year of declining year-over-year earnings. Martha Stewart Living's earnings dropped as its revenue fell 17% last year.

The biggest decline in revenue last year came at the company's core publishing division. Revenue from its publishing division, which puts out a number of regular and special-edition magazine titles, fell 26% last year. In the fourth quarter alone, the company saw a 38% fall in advertising pages, and an even greater drop in advertising revenue, from its flagship title, Martha Stewart Living.

But the company's trouble extended beyond the magazine. Revenue from the company's syndicated television programs fell 4% last year, and sales through its catalogs and Internet site dropped 16%. Meanwhile, the company's general and administrative costs surged, in part due to legal expenses related to the charges facing Stewart.

Even before the verdict came in, company officials projected that Martha Stewart Living would lose 20 cents a share in the first quarter. Following the verdict, they may have to increase the loss estimates, especially if more advertisers or subscribers abandon the company.

The problem the company faces is that its image is so wrapped up with Stewart. Her name is not only on most of the company's magazines, but she plays the leading role on its television shows, and her name is stamped on home living products sold at Kmart ( KMRT), whose shares fell 39 cents, or 1.2%, to $32.51 Friday.

In recent months, Martha Stewart the company has tried to distance itself from Martha Stewart the individual. After her indictment in June, Stewart stepped down as CEO and chairwoman of her company, taking on the title of chief creative officer.

Meanwhile, the company has rolled out a new magazine called Everyday Food, which marks one of its first steps to put out a product sans Stewart's name. The company also recently published a special issue magazine entitled Organizing Good Things and is producing a syndicated television series on pet ownership that doesn't feature Stewart.

But the company has yet to show whether it can survive on these non-Stewart products. While the subscriber base for Everyday Food has surged, so too has its losses. Despite the pet-based show, the company's operating profit from its television segment fell 92% last year to just $358,000.

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