Condé Nast nabs Wired

Wired magazine is being bought by Advance Magazine Publications' Condé Nast Publications unit, the companies announced today.

The parties expect the deal to close in June, subject to regulatory approval. Income from the sale will be used to pay off investors and outstanding loans at Wired Digital, Wired Ventures' online publishing arm, according to the company.

Advance Magazine Publications, part of S.I. Newhouse's publishing empire, has been an investor in Wired Ventures since January 1994. Wired magazine, which was launched in 1993 and founded by Louis Rossetto and Jane Metcalfe, has a circulation of about 400,000.

"We have long admired Wired for its innovative approach to publishing and its strong editorial voice," Advance Magazine Publications chairman Si Newhouse said in a statement.

Advance is owned by privately held Advance Publications, part of the Newhouse conglomerate that publishes newspapers such as The Oregonian and The Cleveland Plain Dealer in 22 cities, as well as 36 weekly business journals in the United States. Condé Nast also publishes Vanity Fair, GQ, and Condé Nast Traveler.

Wired Ventures, Wired's parent, will retain Wired Digital. Neither Wired nor Condé Nast would comment on the sale price.

A source close to the deal said the price is likely to exceed $75 million or $80 million.

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The deal does not include a division that operates several online publishing sites. Wired had been looking for a buyer for the technology magazine and had retained Lazard Freres & Company several months ago. Wired Ventures has tried unsuccessfully to go public in the past.

Andrew de Vries, director of marketing communications at Wired Digital, said the sale of the magazine will go to fund the company's Net efforts. "The decision was based on the fact that Digital is the fastest-growing part of the business and has most potential for future growth," he added.

Wired Digital will carry on as a independent company "but with a much more healthy balance sheet going forward," de Vries noted. "Now we will build out the business that we have been developing over the past three years."

In 1996, Wired Digital made up 7 percent of the company's revenues, and in 1997 it pulled in 30 percent. The unit was expected to contribute about 40 percent of revenues in 1998.

"You can imagine that the board saw the value of this property and that it could come in line with other pure Internet companies, like Lycos or Excite or Yahoo," de Vries said. "So it made sense for us to continue to focusing on that."

The money received for the sale of the magazine will be used to pay off short-term debt. Remaining funds will go toward financing the development of the rest of the company's efforts.

Once the deal is closed and Wired has a clean plate--no debt and some money in hand to back the business--Wired Digital may consider taking its case back to Wall Street.

"We are considering all options at this point," de Vries declared, noting that another attempt at an initial public offering is not out of the question.

But for now, he said, "profitability is first and foremost" on the list of goals. Building up traffic to the Wired properties and focusing on striking the right alliances, strategic developments, and partnerships also are high on the company's to-do list.

Wired Digital generated $3.4 million in revenue in the first quarter of this year, up 113 percent from the like quarter a year ago. It is expected to record a profit by year's end.

Mark Meridian, an analyst at Jupiter Communications, said the sale of Wired magazine will end up hurting Wired Digital.

"The magazine was profitable, and I can't think of ways that this sale would be good," said Meridian, adding that the company left behind is going to face a lot of challenges.

For one thing, the magazine served as a great cross-promotional avenue for Wired's online business, he added.

"It was the perfect audience translation...The demographic that it serves--their 400,000 readers--the vast majority is online," he said, noting that Wired Digital now will likely have to negotiate ads with the new owner.

Most major online properties have offline properties that give them a lot of leverage, Meridian elaborated. "It is all about having another avenue...being tapped into an affinity group. That is the biggest challenge, because Wired's has been taken away. So now Wired has to stay in touch with its readers without its offline component."

One advantage Wired Ventures now will have as a result of not having the magazine anymore, however, is that it can be 100 percent focused on online content and editorial, he said.

In a last-minute offer yesterday, Advance Magazine Publications snatched Wired from Miller Publishing Group of Los Angeles, according to the San Francisco Chronicle.

Wired management told the magazine's 125 staff members about the deal Thursday night at the company's San Francisco headquarters. No workers will be displaced as a result of the deal.

Metcalfe and Rossetto will continue to be board members and shareholders, said Shelley Tatum, a Wired spokeswoman. As for the breakdown for the remainder of the company, and how it will be split among investors and shareholders, she said that it is too early to tell.

Last December, then-publisher Louis Rossetto defended his company against rumors that parts or all of Wired Ventures would soon be placed on the auction block.