Martha Stewart Could Soon Reclaim Domestic Icon Crown

Martha Stewart (search) could yet make a comeback as a lifestyle guru after receiving a light sentence for lying to federal prosecutors, but her return to the helm of the company she founded is far from guaranteed.

Shares in Martha Stewart Living Omnimedia Inc. (MSO) soared 40 percent after the sentencing Friday, on hopes Stewart would soon return to the media and merchandising powerhouse she built from a catering business.

U.S. District Judge Miriam Goldman Cedarbaum sentenced Stewart to five months of prison and five months of house arrest, the minimum punishment allowed by law. Stewart, 62, was also fined $30,000. She was convicted in March for lying about a suspicious stock trade and could have been sentenced to up to 16 months in prison.

"I'll be back," Stewart told media and supporters outside the New York City courthouse. "I'm used to all kinds of hard work, as you know, and I'm not afraid."

Legal and brand experts said the sentence terms meant Stewart could soon be cooking up a bouillabaisse or tiling a bathroom for fans who never stopped adoring her, but she still faces hurdles for returning as a full-fledged company officer.

Hayes Roth, vice president of marketing at brand consultancy Landor Associates (search), said investors and supporters would view the light sentence as an endorsement of Stewart's potential, allowing her brand to withstand her prison term.

That stance marks a turnaround for Stewart, whose company foundered amid intense media coverage of her legal travails and rampant speculation that her brand was finished.

"If she does continue to behave with dignity and is the 'chastened Martha,' she could actually come out stronger," Roth said. "She'll benefit and her business will benefit because she'll be back on top of it."

Stewart has yet to resolve charges against her by the Securities and Exchange Commission (search), which were put on hold pending her criminal case. If she reaches an SEC settlement, it could bar her from serving as a director or officer for at least several years, legal experts said.

But as controlling shareholder, Stewart retains substantial influence. She can maintain communication with her company in jail, and even revive her suspended television show on home decorating and cuisine during house arrest.

"There is nothing illegal in her voting for whatever she wants," said John Coffee, a professor at Columbia Law School. "She can have behind-the-scenes control."

Martha Stewart Living shares were up $3.46 at $12.10 in late trade on the New York Stock Exchange, their highest level since her conviction.

Martha Stewart Living Omnimedia has gradually distanced itself from the celebrity homemaker, including downplaying her name on its flagship magazine. The company pledged Stewart its full support Friday but was mum about her future role.

"We see this as an important step toward closure for MSO," the company said in a statement. "We continue to manage the company for the long term, with a commitment to...evolving MSO as a 'how-to' brand-building enterprise."

Martha Stewart Living has suffered as advertisers pulled out of its magazine and television shows, but home products bearing Stewart's name continue to sell at retailer Kmart, which extended its exclusive contract with her to 2009.

"The only (segment) generating positive operating income is the merchandising business," said Peter Cohan, a management consultant and company watcher. "Consumers are very loyal to Martha Stewart. They are keeping the business afloat."

Stewart's attorneys plan to appeal her conviction, a process that could delay jail time by more than six months even if the appeal is denied, legal experts said.

Stewart was convicted of lying to prosecutors related to her 2001 sale of ImClone Systems Inc. (IMCL) stock, which saved her $51,000. The ensuing debacle wiped off $400 million, or about half, of her company's market capitalization.