UPDATE Don't write Salon off just yet. The struggling online media company is still alive and kicking.
San Francisco-based Salon Media Group, publisher of online magazine Salon.com, said Thursday that it has received $2.5 million in new financing – but will have to lay off 14 employees to satisfy conditions of the funding.
The most significant condition: Salon must break even without an additional round of financing. The staff cuts, representing about 20 percent of Salon's workforce, are part of significant cost-cutting moves designed to reach cash-flow breakeven by the quarter ending Dec. 31.
Salon reported Thursday that revenue for the first-quarter ending June 30 fell 45 percent to $1 million from $1.8 million in the same period a year earlier. The company posted a net loss of $2.9 million (22 cents per share), a 35 percent improvement from a net loss of $4.5 million (36 cents) in the comparable period last year. Excluding noncash expenses, Salon lost $1.6 million (12 cents per share), compared with $3.8 million (30 cents) in the same period a year earlier.
Salon, like many other media companies both online and offline, has been struggling amid the downturn in the advertising market. It reported only $1.9 million in assets on its balance sheet as of June 30, before receiving the additional round of funding.
Michael O'Donnell, CEO and president of Salon Media Group, said in a conference call following the earnings release that he believes the company has been harder hit than others because of negative press questioning whether Salon would survive. He's hoping that will change with the new financing.
"I think we were on everybody's death watch," O'Donnell said. "Hopefully this will give confidence the company is going to be around."
Eleven different investors participated in the funding, which was led by William Hambrecht, CEO and chairman of investment bank W.R. Hambrecht & Co. Other investors include the McKay Investment Group, Alacrity Ventures, Constellation Ventures, and John Warnock, chairman and founder of Adobe systems. Warnock and W.R. Hambrecht already had ownership stakes in Salon.
Salon issued 10 million new shares, priced at 25 cents per share, to the new investors, who now have a 40 percent stake in the company. Rob McKay, managing director of the McKay Investment Group; Bob Ellis, a former executive at NBCi and Time Inc.; and Warnock will join Salon's board of directors.
News of a financing deal pushed Salon shares up 87.5 percent Wednesday to 45 cents. Shares fell 2.2 percent Thursday to close at 44 cents, down 97 percent from a $15 record high in July 1999.
The company's stock has been trading below $1 since the end of January and faces delisting by the Nasdaq stock exchange. Salon made its case against the delisting in a hearing July 26. The company plans to ask its shareholders to approve a reverse stock split of as much as 10-to-1 or higher at their annual meeting in September. That would leave fewer shares outstanding and push up the company's stock price.
In addition to cutting staff, Salon plans to start charging for its formerly free discussion board, Table Talk, as part of a plan to move from a business dependent entirely on advertising revenues to a hybrid model. In April, Salon began charging readers a subscription for premium content such as erotica and certain articles. Salon has signed up 12,000 subscribers to the premium service and is shooting to reach 50,000 subscribers in the first year.
