DOW JONES NEWSWIRES
Interpublic Group of Cos.' (IPG) fourth-quarter net income rose
22% on improved margins as the advertising and marketing company
said the economic downturn is starting to have a negative
effect.
The industry has been battered by the recession as companies cut
back on advertising while consumers rein in their discretionary
spending to save money.
Longtime media industry consultant Jack Myers said in December
that the ad market was in an "advertising depression" and would see
three straight years of declines in ad and marketing spending in
the U.S. starting this year.
The soft economy is likely to force job cuts at ad firms, as new
accounts are less likely to materialize and existing ones get
scaled back.
Chief Executive Michael Roth said the company met its goals for
last year, but "the latter part of the fourth quarter and the early
part of 2009 have begun to show the negative effect that the
broader economic situation is having on the marketing-services
sector."
The parent company of DraftFCB and McCann-Erickson posted net
income of $217 million, or 39 cents a share, up from $178.4
million, or 31 cents a share, a year earlier.
Revenue decreased 4.1% to $1.9 billion, as a negative impact
from the stronger dollar offset gains from acquisitions, as organic
revenue fell 2.2%.
Analysts surveyed by Thomson Reuters expected earnings of 29
cents on revenue of $1.92 billion.
Operating margins rose to 17.4% from 13.7%.
U.S. revenue declined 6.3%, while international revenue slid
1.9%.
The company's media-buying unit, Mediabrands, recently developed
its own online advertising system in order to push into the online
space. The tool creates custom digital ad marketplaces for clients
and creates a database for the marketer so companies can place ads
that appear only to the consumers they are trying to reach.
In a move considered slightly risky, Interpublic replaced
ad-and-marketing unit DraftFCB's chief executive, Howard Draft, one
of Madison Avenue's best-known personalities, earlier this month.
Draft will continue at the company but will focus on relationships
with clients.
Interpublic's shares closed Thursday at $3.56 and haven't traded
premarket. The stock has lost 59% of its value in the last
year.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com