The transcript of Interpublic's earnings conference call gives a few more clues to layoffs planned across the agency network. CFO Frank Mergenthaler said IPG had cut 9 percent of its entire workforce so far. He added that severance expenses will be higher in the third quarter (meaning more layoffs than the same period last year) and lower in the fourth quarter (meaning fewer):
The company's 10-Q filing with the SEC shows that salary costs were down 12.2 percent in Q2 2009, and office costs were down 22.5 percent. Every person laid off reduces salary costs, naturally. Office costs go down too because the company no longer needs to rent the cubicle they worked in.
Coming layoffs will probably fall harder on the U.K. and other foreign territories than the U.S. American revenues were down 14.5 percent, international revenues were down 25.7 percent and the U.K. collapsed -- down 38.4 percent, the company reported.
Here's Mergenthaler's comment on layoffs from the call:
We had a very big severance charge in Q4 '08. So we would think the majority of the heavy lifting is behind us from mid fourth quarter '08 to the end of the second quarter we've had about $120 million of severance, it's associated with 9% of our work force. So to Michael's point, our teams are just maniacally focused but we would think that the majority of heavy lifting in severance we have taken those actions, but with that said we still think we will probably run, leave the third quarter little bit higher than last year and we would expect the fourth quarter to be less.Analysts were gloomy about IPG's prospects going forward. Deutsche Bank said:
CEO Michael Roth states organic growth in 2H09 will be "consistent with the year-to-date performance" of -10.5%, which means the operating environment is not expected to improve dramatically from here (and 2H will likely be worse than 1Q's -5.6%).BMO Capital Markets' Dan Salmon said:
Impact: Negative. We believe a poor new business record in 2009 drove the organic revenue miss. ... we expect investors' to lower their view considerably. On the upside, IPG has landed duties for Charles Schwab and held onto Nationwide in recent weeks. Furthermore, we believe Initiative has a leg up on competitors to consolidate media duties for Hyundai/Kia as the automaker examines overseas duties.
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