This is a partial transcript from "Your World with Neil Cavuto," February 23, 2005, that was edited for clarity.

STUART VARNEY, GUEST HOST: Martha Stewart Living Omnimedia (search) posts a $7 million loss in the latest quarter, revenues dropping 15 percent. Still, the results were better than expected.

Investors are betting that a comeback for Martha Stewart will boost the company's bottom line. Stewart is due to be released from prison on March 6.

The stock has been trading near an all-time high as Martha gears up for a new syndicated TV show and her own version of "The Apprentice" (search).

In a press release today, the company is saying it's eager for Martha's return. And joining me now, Susan Lyne (search), the CEO Of Martha Stewart Living Omnimedia.

Susan, welcome to the program.

SUSAN LYNE, CEO, MARTHA STEWART LIVING OMNIMEDIA (MSO): Thank you, Stuart.

VARNEY: OK. Now you report on loss. You reported declining revenues. But the stock goes to $34.35, near an all-time high. It's the impending release of Martha from prison that's driving the stock, not your financials.

LYNE: I think that's fair. I think people are very focused on the fact that this last two-and-a-half years is finally coming to a close, completely. Martha is coming back unencumbered, and the company now has the ability and the opportunity to plan forward.

VARNEY: The market seems to be saying that the public will forgive Martha Stewart, rehabilitate her image and the brand, Martha Stewart. Can she do it?

LYNE: Absolutely. One thing that I think is worth noting here is that the brand itself — Martha Stewart Everyday, for example, which is our Kmart brand — was not impacted at all during this period of time. The brand, I think, believe actually stands for something. It stands for value. It stands for quality. It stands for style.

VARNEY: Back in the early days, Martha's name was going to be taken out of everything. The brand itself was reduced dramatically. Now, she's back. Martha's name is everywhere.

LYNE: I think the press made more of the idea that her name was being taken off everywhere. In fact, she participated very much in that redesign of the Martha Stewart Living logo. Her name is still on that magazine. They just changed, modernized, cleaned up the logo.

I honestly think that there was never a genuine move away from Martha, although certainly the company was, for a period of time, focusing on other brands and mentioning the fact that there were, in fact, other brands beyond Martha Stewart and Martha Stewart Everyday.

VARNEY: I think I'm right in saying that she's going to do a daily show in front of a live audience. She has to handle television.

LYNE: Yes.

VARNEY: You know how it works. That's your background.

LYNE: Yes.

VARNEY: Do you think she can pull off a softer image, bearing in mind her past and her past appearances in a television forum? Do you think she can do that?

LYNE: Yes, I do. And I should clarify that a little bit, because it's actually live to tape. So it's not actually live like you're live.

VARNEY: But you can do some editing, but nonetheless, the tone, can she adjust?

LYNE: Absolutely. Yes. And if you've seen her as a guest on other people's programs, whether it's Rosie or David Letterman or Oprah, she's a fabulous guest.

VARNEY: I've interviewed her myself. I have, indeed.

LYNE: Very comfortable. Yes, she's wonderful. I've spent a lot of time with her now in the last four months, because I go down to visit her at Alderson. And I've spent hours alone with her, and she has great friends there. She is very comfortable. She's an easy person...

VARNEY: She's also going to become a Trump-like "Apprentice" stand-in. She's doing that show. Now, that's not going to exactly soften her image.

LYNE: I think you'll see Martha's version of "The Apprentice" will be very different. It will be Martha Stewart. It will not be Donald Trump or Martha trying to play Donald Trump. And I think Donald and Mark Burnett were very clear about that when they made the announcement. They will create this with Martha, or Mark will create this with Martha, and I think it will be her own thing.

VARNEY: Susan, I have to ask you, Martha Stewart, as a convicted felon, cannot come back and be a senior executive in a public company, right?

LYNE: No.

VARNEY: That's accurate?

LYNE: No. She made a choice to step down as the chairman and CEO. She can certainly play a huge role in this company. The question is whether she could be an officer of this company and there's been no decision about that.

VARNEY: So whether she's an officer or not, you're saying it doesn't make any difference? She's going have massive influence?

LYNE: I hope we will get as much of Martha's focus and her interest as possible. There's very few people who have the skill set Martha Stewart has to be able to see trends, to know what women want, and how to make a business out of it.

VARNEY: When she comes out of prison, she's got six months of what — what some critics cruelly say is mansion arrest, as opposed to house arrest. She's got to do that for six months. What role can she play in running the company during that period? She allowed to do something, isn't she?

LYNE: She is allowed to work outside her home for up to 48 hours a week. Now, for most people, that would be more than enough time to go to work. Martha works. So, I think that she will also do some work from home.

VARNEY: Is she easy to work for?

LYNE: Well, I have never worked with her but...

VARNEY: Well, you visited her in prison.

LYNE: I adore this woman. I have very strong feelings for her now, having spent a lot of time with her. I admire her. And I learn things from her. So that's all good.

VARNEY: Susan Lyne, CEO, Martha Stewart Living Omnimedia. We thank you very much for being with us.

LYNE: Thank you.

VARNEY: Pleasure.

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