Struggling Playboy outsources business ops

As a result of the shift, Playboy will trim roughly 25 jobs, with some of those positions being transferred to American Media. The struggling lad-mag empire expects to swallow a $2 million charge in the fourth quarter related to those job losses.

However, Playboy now predicts that its flagship magazine could return to profitability by 2011, thanks in part to cost savings from the American Media deal. The company predicts that Playboy will lose $8 million in 2009 and $5 million in 2010 before swinging back into the black. Flanders also predicted that top-line results will improve, with American Media scoring incentives to increase both advertising and circulation revenues.

Judging by American Media's other titles, the Playboy pact seems a natural, organic fit -- the publishing titan also produces Men's Fitness, Muscle & Fitness, and UFC Magazine.

Playboy made the move to transfer control of its business ops as the company attempts to sell itself for $300 million. Reports have indicated that Iconix Brand Group (ICON) and former Playboy entertainment president Jim Griffiths are among the interested parties.

PLA shares are flirting with positive territory in early trading, extending a recent run higher along support from their 10-day moving average. The prospect of a potential white-knight bid has served as a strong tailwind for the stock, but short sellers remain firmly entrenched. After rising by 3.6% during the most recent reporting period, short interest now accounts for 3.1% of the security's float, or 2.7 times PLA's average daily trading volume.

Elizabeth Harrow is a senior equities analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.