“As a company deeply involved in the digitization of education and business information, we were as interested as anyone in the launch of the new device, although we were never part of the launch event and never in a position to confirm details about the device ahead of time,” Steven Weiss, VP of Corporate Communications for The McGraw-Hill Companies said in a statement given to Digital Daily.

“On Tuesday afternoon Mr. McGraw appeared on CNBC in a wide ranging interview to discuss our earnings announcement and growth projections for 2010. His speculative comments about Apple’s pending launch, which he shared earlier in the day in a call with investors, were simply intended to suggest that if the new device were to use iPhone applications, many of our education products would be compatible with the technology and could be made easily available on it.”

Concluding, Weiss wrote, “Unfortunately, it seems that many mistakenly interpreted his comments as being more specific to yesterday’s announcement. It is also important to note that only the products of trade publishers were featured in the launch event. Our digital education programs are not in that category and were never part of those negotiations.”

It would seem, then, that contrary to other reports making the rounds, McGraw-Hill was not abruptly excised from Apple (AAPL) CEO Steve Jobs’s presentation yesterday after Terry McGraw’s disclosure on CNBC. And indeed, multiple sources close to the situation say that the CEO was not given a demo of the iPad before its launch and that McGraw-Hill (MHP) was never intended to be part of iPad launch event in San Francisco.

In retrospect, all McGraw really did on CNBC was to recycle and recast some comments made during the company’s Tuesday morning earnings conference call. Reading over those remarks, it seems plausible that he was simply excitedly regurgitating the same collection of rumor and speculation we all were during the run-up to the launch event.
 
“In the near future, you will undoubtedly see a McGraw-Hill e-book for the college market running on an Apple tablet,” McGraw said during the company’s earnings call. “All our titles on CourseSmart, the industry e-book consortium, are already available to students on an iPhone operating system. That’s because CourseSmart developed an iPhone application last summer with support from Apple. The goal was to have core educational content available on the iPhone operating system, which also makes it possible for e-books to run on new Apple devices using that system.”
 
Continuing, McGraw said, “Consider then the Apple tablet computer, which will be introduced shortly. There is a lot of secrecy about the introduction, but many expect that the Apple device will use the iPhone operating system. If that’s the case, we are confident that our CourseSmart e-books should run well right out of the box on any Apple Tablet. Stay tuned.”

Similar to what he told CNBC, right? Thing is, McGraw spoke with quite a bit more certainty during that interview. He said:

“Yes, they’ll make their announcement tomorrow on this one. We have worked with Apple for quite a while. And the Tablet is going to be based on the iPhone operating system and so it will be transferable.”

Those remarks don’t seem entirely speculative to me. Still, what was McGraw saying that we hadn’t already heard before? Maybe he reads the rumor sites too.

Jobs and company clearly plan on incorporating new products from newspapers, magazine publishers, TV networks and Hollywood movie studios as the iPad rolls out. But there wasn’t much talk about any of those media products during the launch event.

The only mention of TV, music and movies, for instance, came as Jobs showed off the device’s multimedia features. But the implication, at least for now, is that consumers will get that stuff into their machines the same way they get it now, from iTunes, and at the same price–or via Google’s (GOOG) YouTube, which Jobs did take time to demo. That is, no talk of subscription products or of other changes in the media consumption/distribution model.

The same goes for magazine and newspaper products. As predicted, Apple (AAPL) highlighted an iPad app designed by the New York Times (NYT), but there was no mention of how much the thing will cost or whether the paper will charge anything at all.

“This was a demonstration product. It’s too soon to discuss any details such as pricing,” Times spokeswoman Diane McNulty tells me via email.

Apple also highlighted games, bringing out demos from Electronic Arts (ERTS) and Gameloft. But both companies showed off versions of games you can already get for the iPhone and iPod touch.

Jobs did unveil one major media change: Apple is getting into the e-book world and competing with Amazon’s (AMZN) Kindle head on. Jobs made a point of highlighting agreements with five big publishers: Pearson’s Penguin Group, News Corp.’s (NWS) HarperCollins, Hachette Book Group, CBS’s (CBS) Simon & Schuster and McGraw-Hill (MHP). And, as reported, he showed off a higher price point for books than Amazon’s $9.99.

But even that seems fairly preliminary. While Jobs’s demo showed off splashes of color and a more “paper-like” presentation of the books’ pages, it didn’t feature much of the stuff you’d expect in an “enhanced e-book,” like video, audio, etc. So it will be interesting to see how the books, and their prices, evolve.

And that’s the key to all of this: It’s going to take some time. Keep in mind that Apple kept just about all the big media companies at arm’s length before the announcement and didn’t even acknowledge that there was a device until very recently.

Apple expects that like the iPod and iPhone, the iPad will be a big enough hit that media companies will adapt to the new hardware. Some of the media executives I spoke to in advance of today’s announcements were fine with that, but noted that many of them didn’t roll out new products for the earlier devices for a long time following their launch. We may be looking at a repeat here.

“They’ll make their announcement tomorrow on this one,” McGraw said. “We have worked with Apple for quite a while. And the Tablet is going to be based on the iPhone operating system and so it will be transferable. So what you are going to be able to do now is we have a consortium of e-books. And we have 95% of all our materials that are in e-book format on that one. So now with the tablet you’re going to open up the higher education market, the professional market. The tablet is going to be just really terrific.”

Below, video of the exchange. Tablet talk starts at 2:50:

But at least that price was a little bit more than McGraw-Hill (MHP) expected: Bloomberg ended up paying $10.5 million for the weekly instead of the $9.3 million it had previously told investors to expect, the publisher reported today.

After taxes, that nets out to a gain of $6.7 million (versus previous expectations of $5.9 million), and a grand total of two cents added to the company’s fourth-quarter earnings per share.

“With Windows Mobile, we want to permit a range of hardware innovation, and yet, still have a pretty good experience end-to-end, with good applications, and we want the ability for software developers to target both a very high-end and a lower range or mid-range phone. And the ability to scale up and down, to work with multiple hardware vendors, to get a range of competition and innovation and price competition amongst the hardware guys is a big asset. It is certainly what our strategy is.”

That being the case, it’s intriguing to learn that talk of Microsoft’s (MSFT) long-rumored “Pink” phone project has started up again. In a note to clients today, Jefferies & Company analyst Katherine Egbert claims that Redmond is gearing up to launch a phone based on Windows Mobile 7.

“Our recent industry checks indicate Microsoft will be debuting its own phone sometime in the next two months,” Egbert writes. “We expect the new phone to debut soon, at either the Feb 15-18 Mobile World Congress conference in Barcelona Spain, or possibly at CTIA in Las Vegas one month later.”

The device, “a Zune-like phone” according to Egbert–is likely the result of an OEM partnership similar to the one between Google (GOOG) and HTC that produced the Nexus One. She believes it will boast a five-megapixel camera and support 720p HD video and some music subscription/purchasing scheme.

Beyond that, Egbert is at a loss. “We don’t have any information about the cost of the Pink phone, nor do we know what service providers might be partnered with Microsoft,” she explains.

“Revenue from the phone is also very unlikely to be meaningful for many years,” the analyst adds. “However, the new phone might explain why Microsoft has allowed WinMo to dwindle to <10% mobile OS market share. Pink would be the 'third screen' (after Windows and Xbox) and final component in Microsoft's '3 screens and a cloud' strategy."

That has to be unnerving, but I can at least offer a little bit of comfort: The worst-case scenario the employees would be facing had they been purchased by private equity firm ZelnickMedia, which was also bidding for the publication.

The short version: Almost everybody gets fired.

Here’s the longer version of the plan, provided to me by a person familiar with ZelnickMedia’s bid. It sounds like a plausible idea for a PE group that specializes in turning around distressed assets–and a chilling one for anybody who draws a paycheck at BusinessWeek:

• Wind down BusinessWeek’s print business “as profitably as possible”–the company would have to honor existing subscriptions and could still sell ads in the magazine. But the focus would be on building up BusinessWeek’s Web site, which has a decent-sized footprint, though not a huge one.
• Dump almost all of the company’s newsgathering staff and outsource most of that work to Thomson Reuters (TRI).
• Employ a small handful of editorial employees–perhaps 20, down from the 200-plus who are there now. Some of them would run a Huffington Post-style aggregation site that produces no original content, and some more expensive hires would produce a smattering of high-quality reporting and writing designed to burnish/sustain the BusinessWeek brand. “Just to give it uniqueness and sizzle,” my source tells me.
• Dump most of the existing business side, as well, but overhaul and bulk up the sales force.

The insult-to-injury kicker: Under ZelnickMedia’s proposal, the buyer wouldn’t pay a dime for the publication it intended to rebuild. Instead, McGraw-Hill would pay the fund to take the publication off its hands. If that sounds implausible, consider that McGraw-Hill just announced that it will save up to $25 million next year by not owning the title.

Given the above terms, it’s easy enough to see why McGraw-Hill ended up going with Bloomberg. For starters, the winning bidder actually paid cash for the magazine, and McGraw-Hill will end up netting a $5.9 million gain, after taxes, on the deal.

Also important: McGraw-Hill won’t have to anguish as it watches one of its flagship properties get dismantled.

So what will happen to BusinessWeek now that Bloomberg owns it? Nothing nearly so drastic, at least in the short term. For now, Bloomberg is talking about bulking up the title, not shredding it, so that’s a good sign for both employees and readers.

Alas, Bloomberg can’t take on all of the magazine employees looking for jobs, and that pool is only going to get bigger.

Forbes slashed deep into its staff this week, and next week Time Warner’s (TWX) Time Inc. will lay out some of its layoff goals. I’ve heard Time Inc. employees refer to layoff plans as “tree-trimming” or “surgical,” but I think the trimming will feel much blunter to the folks who lose their jobs. The publisher’s cost-cutting plans include hundreds of layoffs–something likely similar to the cuts the publisher went through last year, I’m told.

The New York Post’s Keith Kelly reports today that Time’s News and Finance unit, which includes Time, Fortune and Sports Illustrated, will be particularly hard hit, and I’ve confirmed that myself.

UPDATE: No surprise here: BusinessWeek President Keith Fox is stepping down. Mild surprise: He’s staying on at McGraw-Hill. Here’s his memo:

When we announced that McGraw-Hill was exploring strategic options for BusinessWeek, I promised to communicate with you as openly and often as I could. In this spirit, I wanted each of you to know that I will be remaining with McGraw-Hill after the deal with Bloomberg is closed. I will continue to play a role in the integration post-close and plan to take on a new role at McGraw-Hill in 2010.

During this process, our collective goal was to find the best buyer for BusinessWeek. I am proud that I played a role in ensuring that BusinessWeek has a new home at Bloomberg, where it will thrive under the leadership of Norman Pearlstine. I am committed to the transition and helping in any way that I can.

It’s been a privilege to be the President of BusinessWeek. I thank Terry McGraw for his confidence and trust in me and Glenn Goldberg for his support, direction, clarity, and sense of humor. I’ve also been a member of an amazing team which has navigated the transformation of the media environment with agility, focus, passion, and integrity.

The team–Steve Adler, Jessica Sibley, Tania Secor, Linda Brennan, Roger Neal, and Carl Fischer–is the best in the industry. Like BusinessWeek, they have bright futures ahead of them. I will miss the daily interaction, but I am wiser (and a little grayer) because of their collaborative spirit and desire to make BusinessWeek the global leader in business that it is today.

I also have a special thanks to Patricia Hipplewith, my assistant, who juggled my calendar, protected me from solicitors, and kept me on schedule and well fed! She is the personification of commitment and integrity.

I am humbled by BusinessWeek’s 80-year history. Thank you for allowing me to play a small part in it.

Keith

That works out to less than $15,000 for each of the magazine’s 400+ employees.

That doesn’t exactly synch up with the reporting we’ve seen about the sale. BusinessWeek, among others, has pegged the sale price at somewhere between $2 million and $5 million, plus the assumption of liabilities, which could be tens of millions. Anyone with accounting expertise want to weigh in?

It’s possible that McGraw-Hill will discuss the sale during its earnings call this morning, though I wouldn’t bet on it: BusinessWeek is one of the company’s most visible brands, but it’s barely material to its business.

UPDATE: There was indeed a bit of discussion about the sale. The company confirmed the $5 million sale price, and said Bloomberg “will assume certain liabilities including our unfulfilled subscription liabilities”. I still don’t understand how it gets to the $9.3 million and $5.9 million numbers, but that’s mostly academic at this point.

How will McGraw-Hill fare without BusinessWeek? Pretty well, it seems. The company will lose around $100 million in revenue next year, but still end up saving $20 million to $25 million without having to foot the magazine’s bill, executives said.

That’s the high end of the range Bloomberg will be paying for BusinessWeek, reports BusinessWeek, which has done an excellent job of covering its sale. One important note to make about the price: Those liabilities could total up to $32 million, although it’s not clear whether Bloomberg will assume all of them.

Can’t call this one a surprise, as Bloomberg has reportedly been the lead bidder for some time now. BusinessWeek employees spent most of the day waiting for an announcement to that effect, and finally heard one, via Bloomberg’s wire service, shortly after 5 pm EDT.

Shortly after, BusinessWeek Editor Stephen J. Adler gathered his troops for an informal meeting to discuss the news and to discuss some blocking and tackling: No news on rumored (and expected) layoffs. But he did tell staffers that those who are cut after the deal closes later this year will receive the same severance package they would have gotten if they were still employed by McGraw-Hill (MHP), the magazine’s parent company.

There most certainly will be cuts: McGraw-Hill is selling the 80-year-old magazine because it’s a money pit that was losing between $20 million and $40 million a year, depending on your accounting. And the publisher’s bankers promoted a layoff plan as part of the sales process.

What exactly deep-pocketed Bloomberg intends to do with the publication, however, is unclear. The company, which makes its money renting its namesake terminals to Wall Street traders, is thought to be running its magazine and TV news operations at a loss as it tries to grab a footprint in consumer media. It may ultimately be willing to run BusinessWeek at a loss for a while, as well.

And now a tiny bit of context: At the beginning of this year, there were four major business magazines. Now one, Condé Nast’s Portfolio, has been shut down and another sold at a fire-sale price. Meanwhile, my former colleagues at Forbes expect to hear about yet another restructuring round in the near future. And while Time Warner (TWX) CEO Jeff Bewkes was careful to list Fortune magazine among the core assets at his company’s Time Inc. unit at an industry event today, that can’t assure the queasy souls who work there.

Here’s the memo to BusinessWeek staff from the magazine’s BusinessWeek publisher, Keith Fox:

All,

Moments ago, McGraw-Hill announced that Bloomberg L.P. has agreed to acquire BusinessWeek. This is exciting news on many levels. Joining forces with another of the world’s leading news organizations enhances BusinessWeek’s ability to further serve our global audience and our valued customers. And Bloomberg will gain a powerful brand with a history of editorial excellence and strong reach among business professionals.

While the ink is barely dry and the long-term plans are being worked out, we do know that Bloomberg is committed to and values our brand, our editorial integrity, and our ability to drive advertising, circulation, and new digital revenue.

BusinessWeek will strengthen Bloomberg’s online, television and mobile products and creates an opportunity for Bloomberg News to reach decision makers in the c-suite. Online, BusinessWeek.com and Bloomberg.com will have more unique visitors than any non-portal business and financial site. In addition, Bloomberg expects to build television content around the powerful BusinessWeek brand and our world-class journalists.

I am tremendously proud of the work all of you have done in the past few months. Despite the uncertainty, we have continued to produce first-class products for our readers and advertisers, and I want to thank you deeply for your efforts. I also want to thank Steve Adler, Jessica Sibley, Tania Secor, Roger Neal, and Linda Brennan, for their extraordinary ability to personify the best of BusinessWeek during the deal process while leading their respective organizations.

I know that while this announcement answers some of the questions you’ve been asking over the past few months, it raises others. The sale is expected to close by the end of the year and we will be working on transition plans in the coming weeks. I can tell you that all BusinessWeek staffers will remain employees of The McGraw-Hill Companies until the transaction closes, and that it will be business as usual–producing the magazine and the website, and serving our advertisers–through the close. We will give you more details when we can.

We’ll be holding a town hall meeting later today at 5:45 EST, after which a Q&A will be provided to all employees; you will receive more details shortly. A call for the Asia teams will be scheduled shortly.

Again, I want to thank you all for your professionalism and dedication during a challenging time. I look forward to working with you on the promising next chapter in BusinessWeek’s history.

Keith

That’s part of the pitch that Evercore Partners has been making to investors on behalf of McGraw-Hill (MHP), which wants to dump BusinessWeek.

The New York Times’s Stephanie Clifford gott her hands on the offering memo Evercore has been circulating to potential bidders, who are supposed to submit offers by today. Reportedly in the mix: Bloomberg; ZelnickMedia; New York Magazine owner Bruce Wasserstein; OpenGate Capital, which bought TV Guide last year for $1 plus debt; and Platinum Equity, which is bidding for the New York Times’s (NYT) Boston Globe.

In a story published yesterday, Clifford reviewed the magazine’s financials, which are miserable. Ditto for the magazine’s Web site. Today she points out Evercore’s plan to entice buyers: A ready-made layoff plan that would lop off 20 percent of the magazine’s staff.

The Evercore memo says the layoffs are actually “in process,” an assertion that seems to surprise BusinessWeek’s staff, which has seen no sign of layoffs. So best to interpret these numbers as suggestions, not plans. That said, here are Evercore’s suggestions:

In editorial, 55 of 217 positions are supposed to be eliminated. Of sales, 9 of 69. Of marketing, 6 of 26. Of technology, 8 of 33. Of circulation, just one of 19. And in the “other” category, 6 of 57. That’s a total of 85 eliminations among 421 jobs – about 20 percent – leaving 336 BusinessWeek employees.

“BusinessWeek will establish a leaner, entrepreneurial staff without affecting the brand, positioning of the franchise or revenue outlook. The eliminations of editorial staff are primarily in editorial support operations (makeup and copy desk), but also include a reduction in the number of journalists to reflect the smaller folio size of the publication. The positions eliminated in sales are primarily for sales support, but also include some consolidation of integrated sales account managers. The remaining positions eliminated are in other business support functions.”

A logical question: If these cuts are so easy to make, why hasn’t McGraw-Hill made them? I know that this strategy isn’t uncommon in auctions: Many moons ago, Time Warner (TWX) held off making cuts at its music unit so that a new buyer could do it itself, and that’s exactly what Edgar Bronfman Jr. and crew did once they got their hands on Warner Music Group (WMG). But the practice still baffles me. Anyone?

In an interview on Bloomberg Television, he said interested parties include private equity, hedge funds and strategic buyers. “Everybody’s involved,” he said.

McGraw recently announced a decision to seek potential buyers for the magazine, which has been hurt in the recessions by a downturn in the print advertising market.

Read the rest of this post on the original site

Now we know. BusinessWeek’s Jon Fine talks to people who have seen the black book for BusinessWeek, which McGraw-Hill (MHP) has indeed put on the block. The numbers are brutal. Fine:

The data state that BusinessWeek lost around $20 million on revenues of $147 million in 2008, and that slightly smaller losses are projected in 2009 on revenue of around $135 million. These losses do not, however, include key corporate overhead items, such as rent and certain infrastructure-related costs. When all those items are factored in, the total loss figure essentially doubles, said two executives who saw the data.

Not surprisingly, those numbers seem to have scared off every traditional publisher that might be a logical buyer. The list of nonacquirers includes Time Warner’s (TWX) Time Inc., News Corp. (NWS) (which owns this Web site), Bloomberg and Thomson-Reuters (TRI).

So who does want this thing? Fine suggests that Open Gate Capital, the private equity firm that bought TV Guide for $1 plus debt last year, may be up for a similar transaction. Another possibility: Billionaire Bruce Wasserstein, who’s already shown a penchant for high-profile properties, like New York magazine.

Spanfeller’s departure comes amid a flurry of bad news for finance publications. In April, Condé Nast pulled the plug on Portfolio, its business magazine and Web site, after a very expensive two-year run. Earlier this week, publisher McGraw-Hill (MHP) announced that it was shopping BusinessWeek, and observers are floating the notion that the company may end up giving the magazine away to anyone who wants to take on its annual losses.

Time Warner’s (TWX) Fortune magazine has also been battered by the recession, which has been particularly hard on the finance, auto and luxury-good companies that business publications have traditionally relied upon. And Forbes itself has gone through multiple rounds of layoffs since last fall.

In a memo to the company’s employees, Forbes CEO Steve Forbes praised Spanfeller for building out the company’s Web property, which says it receives 18 million unique visitors a month.In the aftermath of the dot.com crash, Spanfeller helped turn Forbes.com, which the family-owned company was close to shutting down, into a powerhouse.

But Forbes’s plan to take the Web property public earlier in the decade never panned out. And once Forbes sold a 40 percent stake to private equity investors Elevation Partners three years ago, plenty of Forbes employees, including me, had speculated that Spanfeller would look for a job that promised a big payout. That said, it wasn’t that long ago that Spanfeller was the victor in a power struggle with Jim Berrien, the former publisher of the Forbes print edition.

The news was first reported by AOL’s Daily Finance. Here’s the company memo from CEO Steve Forbes:

To: All Hands

From Steve Forbes

July 16, 2009

Jim Spanfeller, President and CEO of Forbes.com has decided to step down from leading our website after nine years. In the entrepreneurial spirit that Forbes has always championed, Jim will be setting up his own media management company.

Describing his future plans Jim said, “The world of media has changed rapidly in the past 10 years and the velocity of the change promises only to increase going forward. I’ve had a great run at Forbes and have been deeply involved in the breakthroughs and transformations between traditional and digital media.  Now I see a huge opportunity to have my own media management business that will help other traditional media companies make the most of their enormous prospects in digital venues, taking all I have learned here in the past decade and applying on a wider horizon. Forbes.com has truly been a truly wonderful ride and I am deeply in debt to the Forbes family for letting me be a part of it.”

Jim has done a monumental job of bringing Forbes.com to the lead position in business websites, and secured Forbes.com as the must visit site for not only global business leaders but also anyone interested in the finest business reporting and analysis available. At present Forbes.com has 18 million unique visitors a month.

Along the way, Jim has overseen the development and growth of Forbes Digital, which includes Forbes.com, ForbesTraveler.com, Investopedia.com, RealClearPolitics.com, RealClearMarkets.com, Real Clear Sports, and Forbes Business and Finance Blog Network, which together reach 40 million unique visitors a month.

This immense growth on the digital side of the business was spearheaded, pursed, and led by Jim with enormous success. The digital world is still uncharted with few rules, and Jim’s intellect, creativity, and business acumen helped bring us our number one position. For this the Forbes family is very grateful and we wish him all the success in his future plans.

Since Elevation Partners partnered with Forbes three years ago, Jim has worked very closely with them on the growth and development and vision for Forbes.com.  Commenting on Jim’s departure, Roger McNamee of Elevation said, “Jim did a fantastic job leading Forbes.com. In an era when competitors feared it, Jim embraced and evangelized the internet, with huge benefits to Forbes and its audiences. We are grateful for his contributions over the past nine years.”

Jim will be staying through a transition period at least through Labor Day. Please join me and my brothers in wishing Jim all the best in the future, which he deserves.