Saying that Playboy (NYSE:PLA) "fails to excite" is like saying that Tony Robbins did not motivate. For years, the company had such a powerful name, along with its founder, Hugh Hefner, that there was barely enough room in the industry for competition.

The 1990s brought with it the Internet and the promise of not having to walk into the 7-Eleven (NYSE:SE) to embarrassingly buy a Playboy, three candy bars, a soda, and a few other magazines that will gather more dust than your exercise machines. One look at the company's second quarter 3.6% revenue increase reveals a few new-age trends: Playboy magazine subscriptions were basically flat, and newsstand purchases declined 36% from last year; domestic television network revenue was down 5.7%; and the bright spots were International TV (+16%), Advertising revenue (+17%), Online (+15%), and Licensing (+22%).

Playboy's net loss of $0.26 per share for the quarter far exceeded the $0.19 per share loss expected by analysts and the $0.04 it loss last year. Shares are off more than 18% today on the news, reaching a new 52-week low in the $8.90 range.

The company experienced healthy operating profits in its Publishing, Online, and Licensing divisions but was sunk by the Entertainment division's $1.5 million "revenue rate adjustment," more than $700,000 in employee-related costs, and costs associated with new international networks. CEO Christie Hefner (Hef's daughter) also disclosed that the company will be "EPS positive" in 2004, but its segment income, which she expects will be around $29.8 million, is expected to be below the company's previous guidance of $33 million.

On a positive note, the company has taken steps to reduce operating costs in its Entertainment division and expects to turn a profit in the second half of the year. It is plain to see that Playboy's advertising revenue is more than compensating for mature magazine sales. Furthermore, growth in international markets continues to be quite attractive, and the company is trying to leverage this expansion. The online market also continues to perform well, and the company's tremendous brand name and "bunny ears" image is still extremely marketable.

While it is widely known that other male-oriented magazines such as FHM, Stuff, and Maxim (and other so-called "lad" rags) have eaten into magazine sales, the company is looking to other segments for the majority of its growth. Playboy has been an institution in this country for half a century, and I don't expect that history to change overnight. The company still has a solid balance sheet and a P/E of 20 relative to next year's analyst estimate of $0.54, which compares favorably with its 20% forecasted growth rate over the next five years.

Related Fool stories:

Fool contributor Phil Wohl spent more than 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.