Nobody knows the importance of first impressions better than Martha Stewart. And boy has she made them. Take Oct. 19, 1999, the day the domestic doyenne's company, Martha Stewart Living Omnimedia Inc., went public. The stock with the moniker of MSO came out at the high end of the range proposed by its underwriters -- between $16 and $18 per share -- then catapulted to $49.50. It ended the session at a still impressive $36.88 -- and never again came near to its first-day peak.

The stock today hovers between $3.50 and $4 per share, leaving MSLO with an enterprise value that's less than $200 million. It bears noting this diminished trading range has nothing to do with Stewart's spending five months in the slammer seven years ago. In fact, during the period of incarceration, MSLO shares more than doubled from $15.35 to $37.45. Their steady retreat since then reflects the same forces sending all of publishing into a tailspin. Moreover, because MSLO now comprises publishing, broadcasting and merchandising, its first impression as a highflier in the bubble of 1999 has given way to a fuzzy impression as a laggard in distressed media endeavors. That the company also has major moving parts these days, from the trading of Kmart Corp. for Home Depot Inc. in merchandising to the abandoning of NBC for the Hallmark Channel in broadcasting, adds to the perceived fuzziness.

Yet there are aspects unique to MSLO that have observers believing its founder will soon steal a two-page spread from Hugh Hefner's playbook and, like Playboy Enterprises Inc., take itself private. Some even insist that Stewart, who already controls 50% of MSLO's outstanding shares and 90% of the vote, would be a fool not to go private. After all, they note, the 24 million shares not already owned by MSLO executives or directors could be brought in for less than $100 million at today's prices. And think what you will about America's first self-made female billionaire, whether it's her jailbird nickname of M. Diddy or her daughter's decision to marry in a downtown courthouse instead of a decked-out country club, Stewart is nobody's fool.

On the contrary, she, better than anyone, can appreciate the biggest shortcoming of the cross-promotion powerhouse she has created: Its ever-evolving business model isn't as accessible to investors as those of other companies. "Even analysts sometimes have trouble getting their arms around the spending part," says Michael Kupinski, director of research at Noble Financial Capital Markets. The irony that her business model's fuzziness puts off investors otherwise in thrall of her orderly aesthetic may or may not be lost on Stewart. But that doesn't mean she's obligated to stand on ceremony until these investors discern that the interactive collection of assets under her command is, indeed, a good thing. "Unless the public market quickly realizes the true intrinsic value of the company and its franchises in the near term," says analyst Robert Routh of Phoenix Partners Group LP, "a private-market transaction that could value the company north of $750 million is possible."

The comparison of MSLO's Stewart to PEI's Hefner offers a useful jumping-off point. Both founders entered America's consciousness through magazines, although Stewart also authored nine books before teaming with Time Publishing Ventures Inc. to launch Martha Stewart Living in 1990. (This joint venture unwound in 1997, leaving TPVI with a small interest in Stewart's businesses.) Both print icons also became so identified with their creations as to raise specters of insurmountable successions. And though Hefner got a much earlier start, having founded Playboy in 1953, both wound up taking their companies public.

According to the last Form 10-K filed by PEI, which reverted to private status in March with the help of financial sponsor Rizvi Traverse Management LLC, the companies also grew to be about the same size. For 2009, MSLO's revenue of $244.8 million barely exceeded PEI's of $240.4 million. Then, too, they recorded operating losses for the year -- $12 million for MSLO and $39.8 million for PEI -- which would have been operating incomes were it not for outsized corporate expenses in both cases and an equally debilitating impairment charge in PEI's case. Most remarkable, though, is that they evolved along the same lines. That is, MSLO's publishing, broadcasting and merchandising segments are the same as PEI's print/digital, entertainment and licensing segments, only differently named.

An examination of these segments not only reveals that MSLO and PEI eventually arrived at the same business model but indicates why investors have yet to embrace it. This shared model basically casts the merchandising-licensing segment of each company as the primary driver of cash flow. It then uses the companies' other two segments -- publishing-print/digital and broadcasting-entertainment -- as means to advance this end. "Everything they do is geared to growing the merchandising segment," says analyst Routh, who this month initiated his coverage of MSLO with a buy rating. "All the other segments have to do is serve as the equivalent of breakeven advertising campaigns."

The approach takes a while, understandably, to win over investors who grew up regarding MSLO and PEI as magazine money machines. But Routh, already sold on the merits of the model as reconfigured by MSLO and PEI, believes the 60% Oibda margins commanded by MSLO's merchandising segment more than justify the segment's ascendancy. And by 2019, he predicts, those margins will ratchet up to 80%. "So you read her magazine, and you always see her on TV," the analyst says of the post-print model at work. "Then you suddenly find yourself in Home Depot in need of two cans of paint. Who do you think of then? That's the strategy going forward."

It's also a strategy that's further along than many suspect. A check of comparable 10-Ks, for example, shows that merchandising accounted for 81% of MSLO's 2009 operating income before corporate expenses. Licensing at PEI, meanwhile, contributed 65% of that year's operating income before corporate expenses. As for their print legacies, MSLO had already established publishing as a loss leader, with its contribution to 2009 operating income before corporate expenses clocking in at a minus 0.5%. The same measure that year for PEI's long-dominant print/digital segment came in at 4.9%.

This is a far cry from when MSLO went public in 1999. In registration statements filed at the time, MSLO calculated that its publishing and broadcasting segments contributed 82% of 1998 operating income before corporate expenses. The comparable calculation by PEI had publishing and entertainment accounting for 110% of that year's operating income before corporate expenses. (The greater-than-100% amount attributed to PEI's publishing and entertainment segments was a byproduct of operating losses posted by two other PEI segments at the time: casino gaming and Playboy Online.)

"The cash flow engine today is obviously merchandising," says Noble's Kupinski, staying with the theme. "The only question is the ability of management to cut costs elsewhere to keep as much of that cash as they can." But that doesn't mean MSLO's no-longer-top-priority publishing and broadcasting segments must be loss leaders in perpetuity. A successful cost-cutting campaign combined with publishing- and broadcasting-revenue improvements, the research director continues, "could be the difference between the stock at where it is today and one trading between $6 and $8 or even higher. Right now, with the public value where it is, you can get all of [MSLO's] media assets for free."

MSLO declined to be interviewed for this article, citing a quiet period leading up to its first-quarter earnings release on April 27. But there's no denying its actions over the past couple of years include bold strokes aimed at advancing its reconfigured business model. Boldest of all, no doubt, was MSLO's ending a 13-year merchandising partnership with Kmart and replacing it in March 2010 with Home Depot. The former relationship couldn't help being strained by the bankruptcy of Kmart in 2002 and its acquisition of Sears, Roebuck & Co. in 2005 -- bookends for Stewart's equally disquieting insider-trading trial in 2004. That it ended badly was all too evident when, in September 2009, Stewart asked on CNBC: "Have you been in a Kmart lately? It is not the nicest place to shop."

The replacement relationship, in contrast, appears to be exceeding the expectations of even its partners. A corporate mandate to draw more women into its stores makes Home Depot a particularly good fit with MSLO. So far, 14 categories of Martha Stewart-branded products are available in Home Depot's 2,000-plus outlets in the U.S. and Canada, with additional rollouts slated for 2011. The fast start helped MSLO's merchandising revenue increase 31% in the fourth quarter of 2010, once Kmart's contribution to the year-earlier period was excluded. Looking forward, management's full-year guidance for the segment calls for a 15% revenue increase, an estimate Noble's Kupinski believes "may prove conservative."

Not that Home Depot is the sole driver of MSLO merchandising. Nearly two dozen such partnerships exist, most notably with Macy's Inc., PetSmart Inc. and Sandals Resorts International, encompassing product lines that bear not only Martha Stewart's name but Emeril Lagasse's. (MSLO acquired the ubiquitous chef's franchise in 2008 for $50 million.) Analyst Routh, for one, expects more to follow: "In a nutshell, we feel that MSLO has a high-class problem at the moment, given the brand and its value. We think both domestic and international partners are knocking at the company's door, and MSLO can pick and choose what and who they want to be associated with."

After the Kmart-for-Home-Depot trade, MSLO's most dramatic development occurred in the broadcasting segment. In January 2010, after five years of being syndicated by NBC to affiliate stations, "The Martha Stewart Show" negotiated a five-hour weekday programming block with Hallmark Channel. The cable channel, operated by Crown Media Holdings Inc., traditionally serves up such perennial reruns as "The Golden Girls" and "Little House on the Prairie" to the sliver of its 90 million potential audience still interested in such fare.

MSLO knew the risks of leaving NBC -- fans of Stewart would have to relocate her among the hundreds of channels offered by their respective cable companies -- but also knew the risks of staying. Stewart's syndicated show would begin at 2 p.m. in some markets and at 3 a.m. in others. Yet, even in the same market, incessant schedule changes among an NBC station's syndicated offerings kept Stewart loyalists in the dark about when their diva would air. Hallmark Channel, the reasoning went, would at least offer a daily block with nationally consistent time slots. Plus, it would give MSLO the opportunity to introduce programs other than "The Martha Stewart Show," including "Mad Hungry with Lucinda Scala Quinn" and "Petkeeping with Marc Morrone."

The official switch to Hallmark Channel in September initially generated weaker ratings than anticipated. Stewart's debut appearance, for instance, drew an audience not half as large as the one that tuned in to see "The Golden Girls" in the same time period the previous year. But Crown Media has since reported that, compared with the first half of the fourth quarter, MSLO's Hallmark Channel block was racking up rating gains between 40% and 80% during the holiday period. And in its recent annual report, it let drop that commercial time in the MSLO block already sells for 117% more than it did a year ago.

Although long-suffering investors can be excused for wanting more clarity on MSLO's Hallmark Channel initiative, not to mention the Home Depot partnership still in merchandising infancy, patience has never been Stewart's strong suit. Besides, she turns 70 in August. And that same month, as MSLO regulatory filings repeatedly note, she closes the chapter on her insider-trading fiasco by satisfying the final condition imposed by the Securities and Exchange Commission. It's the condition that barred Stewart for five years from serving the company she created as "a director or as an officer with financial responsibilities." Its termination seems a perfect place not only to close that one chapter but to open another -- a take-private chapter that leaves a lasting impression even more impressive than the first impression MSLO made on going public a dozen years ago.