MDC Partners should get "leaner and meaner" through "optimization of headcount," according to BMO Capital Markets analyst Dan Salmon. Those terms are usually euphemisms for layoffs and job attrition. Salmon says that "hopefully" the company can dump its callcenter operations, whose margins are dragging the company down.
The note comes after MDC's Crispin Porter + Bogusky lost the Volkswagen account and Kirshenbaum Bond Senecal + Partners lost Wendy's. It's not all bad news: Salmon's missive gives generally positive reviews to MDC and rates the stock "outperform." Regarding the account losses:
In the past month, Kirshenbaum has lost the Wendy's account (we believe to have accounted for around 2%-3% of MDC revenue) and Crispin has lost Volkswagen (we also assume around 2%-3% of MDC revenue). For MDC, this leaves a pair of notable holes in each of their flagship agencies' rosters.BMO estimates that MDC's full year revenue for 2009 will be $559 million, a decline of 4 percent from 2008. Good news will come in the second half of the year, the BMO note says:
... (hopefully) the call centers can be peeled off once the holding company gains more scale.Salmon floats the idea of Crispin stealing the Xbox account from McCann Erickson. Could that happen? KBS+P's S new CEO, Lori Senecal, just came from McCann where (according to the press release) she worked on Xbox. Might she facilitate a transfer of the business to her Miami-based sister agency? At the very least she will have some nuggets to offer the MDC folk on the state of Xbox at McCann. Of course, Crispin would have to give up Guitar Hero to take Xbox.
MDC should resume taking share in 2H09. This should be driven by growth at Crispin as it rolls out work for Microsoft Windows 7 (Volkswagen work should last through November/December) and also by the stabilization of the CRM segment later in the year after one call center was shut down in December 2008 to be re-tooled.
This should in turn help MDC drive continued margin growth (it is the only holding company we forecast to grow margins in 2009) through optimization of headcount, while the continued re-organization of the agency portfolio and further leveraging of a "leaner and meaner" corporate office will also contribute.
Final note: Did you check out Senecal's Twitter stream yet? It's quite funny.
- See BNET's previous coverage of MDC:
- MDC's Crispin and Kirshenbaum Lose Accounts as Obligations to Partners Increase
- MDC Partners Q2: Nadal's Stated Goal of Growth Recedes Ever Faster
- Burger King Ad Fight: The Worst-Case Scenario for Crispin Porter + Bogusky
- Crispin Porter & Bogusky and Kirshenbaum Bond Owed $47 Million by MDC Partners
- MDC Partners Q1: Revenue Down 10%; Profit Comes Following Mass Layoffs
- MDC Q1 Preview: Freeman Off the Books; Goodwill "Unimpaired"; Nadal Does a Curious Art Deal
- 163 Laid Off at Accent Marketing, the Agency That's a Big Chunk of MDC Partners' Revenues
- Cliff Freeman CEO Exits After Fla. Lottery Pitch Loss; Twitter Trail Tells Strange Tale
- MDC Partners Q4: Cliff Freeman Mystery Deepens
- Does MDC Partners Have a "Goodwill" Problem?