Roth's IPG: Revs Drop in 3Q, Ad Spend Not Rising

Michael Roth of IPG

Interpublic CEO Michael Roth is admittedly in a pickle. He repeatedly says letting go of talent can be crippling -- yet the holding company continues to make cuts, hoping to manage through the current storm.

Roth says that maintaining high-performing executives and creatives is critical to allow IPG to ramp up client services swiftly once a recovery sets in.

"In our industry, it's not advisable to take out costs on a pace with the level of revenue declines that we are currently experiencing," he said Wednesday on an investor call to discuss disappointing third-quarter results.

Yet over the past year, IPG has cut 5,100 positions -- about 11% of its work force. The cuts apparently have brought severance payments of more than $143 million. The company employs about 40,000.

The holding company reported a sharp 13.4% decrease in organic revenues in the U.S. in the third quarter, compared to a 7.9% jump a year ago. U.S. total revenue fell 13.5% to $834.1 million.



Still, the company posted a $17.2 million profit -- versus $38.7 million a year ago.

But a sign of how tough things were: IPG took the unusual step of mentioning to investors that it has made cuts in such granular areas as office supplies. Reductions in travel and telecom expenses were also made.

Roth rejected suggestions that ad spending may be on the upswing, suggesting that IPG could also be in for a rough fourth quarter -- although clients such as Wal-Mart and Microsoft could run holiday campaigns.

"The tone of our conversations with clients concerning the economy is improving," Roth said. "However, we've not seen this yet converted to consistent commitments to new or existing projects. Therefore, it looks as if the pace of the recovery will be gradual."

Roth did say there were some bright spots in the third quarter, with the food and beverage, consumer packaged-goods and retail categories showing strength. But the "unprecedented challenges" facing the auto industry continues to be a lag; IPG derives a heavy portion of its business from General Motors. (Agency Deutsch recently won the VW account, which may offset that going forward.)

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