Playboy Gains Capital & 'Spins' Web Division

Playboy Enterprises, Inc. is a huge, international company with many concerns besides its publishing business. Today, when building capital is everything and losses are sky-high in certain cases, a company like Playboy has no other option than to get rid of its most draining businesses.

In this case, it's the Web division. The larger question, though, rests with the way Playboy is handling the loss. The company is 'spinning' off its Web division in order to build capital for its new E-Division, as well as to eliminate ongoing development costs for the new E-Division from the company's books.

In a time of hot Internet sell-offs, what does the 'spin' really mean? Many companies would prefer to go the route of asking investors to finance ventures like the Web division. With Playboy, however, the value proposition of Playboy Enterprises is at stake, and both the Web division and the parent company will encounter problems in sharing and extending the company brand.

Many companies have successfully made the spin-off work, and in 1999, 29 companies completed a Web spin-off. While some were successful, others suffered drastic losses in the price per share of stock.

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