"I wanted to keep working," said Mr. Li in an interview with The Observer. "I wanted to keep working on a brand that was a strong one and to have opportunities to work at blue chip brands like Condé Nast Traveler don’t come around often."

Mr. Li was Portfolio's publisher from 2008 until last Monday (and only found out about the magazine's closing about an hour before he had to inform his staff) and was Men's Vogue's publisher before that. We asked Mr. Li why he decided to take a step back with a No. 2 position instead of holding out for a publisher's job somewhere else.

"It’s less about being No. 2 and more about being with a magazine that’s very established," said Mr. Li. "There’s a familiarity there and it’s still within David Carey's group and I really wanted to continue to work with David. I don’t get hung up on the No. 2 number."

Mr. Carey oversees Traveler, The New Yorker, Wired, Golf Digest and Golf World, and, until last week, Portfolio as well. (It's worth noting that according to Women's Wear Daily, Condé Nast Traveler is hiring Observer editor Peter W. Kaplan as its new No. 2 on the editorial side.)

Mr. Li will replace Michael Provus as associate publisher. It is not clear whether Mr. Provus will stay with the company.

And in other ex-Portfolio staffer news, we hear the magazine's former associate publisher, Gail Day, will become The New Yorker's new ad director

Mr. Li said in an interview with The Observer this morning that he was only made aware of the news earlier today. When he walked through the lobby of 4 Times Square this morning at 7:45 a.m., he knew he had a meeting scheduled with the group president of Portfolio, David Carey, but he wasn’t aware of anything else.

The meeting involved Mr. Carey and senior management of Condé Nast (Mr. Li declined to say who specifically). As soon as he entered the room, he knew what it meant. “Times have changed and businesses need to make tough decisions,” he said. “I don’t blame them. Am I upset? Of course I’m upset. But I understand.”

"I feel terrible about it," said Mr. Carey, the magazine's first publisher who has since been promoted as the Condé Nast group President and oversees Mr. Li and the magazine. "I believe in this concept and I believe in this product. And I hear from enough people to know the impact it was making in the world, but to reconcile that knowledge with a very sober take on the business climate is a terrible feeling. I feel terrible for this loss and I've received a number of emails this morning from people and CEOs saying how much they enjoyed Portfolio. We had a very good thing going on the editorial front, but like anyone who launched a new business in 2006 or 2007 or made a major acquisiton in 2006, we're finding it's very tough to match the expectations at the launch to the reality of today."

Mr. Carey, likewise, said that he only found out this morning, but that he had a "strong sense" late last week that Condé Nast executives were coming close to pulling the plug.

He said that the magazine had through the end of 2010 to prove itself financially, but that with 18 months to go, it wasn't going to happen.

"The gap is too big from where we are now to where to need to be," he said.

Since Portfolio was effectively saved last October by the company—instead of folding the magazine, its publishing schedule was reduced to 10 issues a year, and it laid off almost the entire Web team—it has been open season on the magazine, and its editor, in particular within the building. Editors at other magazines grumbled to colleagues and friends that it was a wonder the magazine was still in business. Condé Nast staffers were left scratching their head as to why they had to make repeated expense cuts, yet Joanne Lipman’s first class air ticket to Davos was paid for by the company. When we asked Mr. Li about this, he strongly defended Ms. Lipman.

“She changed business journalism,” he said. “Portfolio changed business journalism. The whole idea of writing breathlessly glowing profiles of CEO, we didn’t play that game. And you know what, good for her. And good for John Cassidy and Jesse Eisinger,” he said, referring to the magazine's contributing editor and senior writer.

“I’m proud of the fact that in our first year we won a National Magazine award,” he continued. “Business Week and Fortune? Please, that never happened. We were just nominated for two Webbys!”

It's unclear right now whether staff will stay within the company—there is a plan to keep as many people as possible—though editor-in-chief Joanne Lipman is out at Condé Nast, according to one source. According to a Portfolio staffer, some have taken to toasting the news of the magazine's closure with a Stella Artois—the official beverage of magazine closings.

This story was updated at 1:05 p.m.

Edited by Joanne Lipman and launched to much hoopla in April 2007, the magazine went on to garner a National Magazine Award in 2008 for best magazine section as well as intense criticism for over-spending and its choice of coverage.

In October, The Observer's John Koblin reported that the magazine was forced to cut its staff by 20 percent and go from 12 issues a year to 10.

A call to a Condé Nast spokesperson for comment has yet to be returned. Updates will be posted as they are made available.

Update, 10:26 a.m.: Portfolio's Mixed Media blogger Jeff Bercovici confirms the news.

Update, 10:43 a.m.: Condé Nast Publications Group President David Carey sent the following statement:

Earlier today, Condé Nast announced, quite regrettably, that it is pulling back from its investment in Portfolio.

For this high-profile, 21-issue launch, the recession has helped and hurt the brand.  While the unprecedented nature of these times has made business and the economy the main topic of conversation, it has also led to high levels of uncertainty and a tremendous reduction in ad spend in the five key sectors Portfolio's business model depends on.

The company is deeply grateful to Portfolio's readers, for the support of its many friends in the advertising community who worked so closely with Joanne Lipman and William Li, and to the many journalists who keep such a keen interest in all things related to this introduction.

WILLIAM LI NAMED PUBLISHER OF MEN'S VOGUE

William Li has been named Publisher of Men's Vogue, it was announced today by Thomas A. Florio, Publishing Director of Men's Vogue and Vice President and Publisher of Vogue. His appointment is effective immediately.

Mr. Li has been Associate Publisher of The New Yorker since April 2004, after joining the magazine in January 2002 as Advertising Director. Previously, he was Publisher of HomeStyle, where he oversaw the launch of the design and lifestyle publication.

Mr. Li graduated from the University of Massachusetts at Amherst and lives in New York City.

Condé Nast Publications, currently publishes twenty-eight magazines. The company includes, Fairchild Publications, Golf Digest Publications, Condé Nast Business Group, Condé Nast Media Group, CondéNet, and The Shared Services Centers.