Interpublic to Focus on Cost Control

Sees Organic Revenue Growth but Losses Widen

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NEW YORK (AdAge.com) -- Interpublic Group of Cos. is making cost control a priority as it posted quarterly organic revenue gains in the first quarter but saw net losses widen.
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$182 million loss
Overall revenue for the No. 3 ad-agency holding company was basically flat at $1.33 billion, but organic growth, an important metric in the ad business, grew 4.8% during the first quarter of 2006. Net loss was $182 million, up from $151 million during the same period last year.

"Cost control will be a strong priority because that's an indication of whether our turnaround is taking hold," said Chief Financial Officer Frank Mergenthaler.

"We're pleased with organic revenue increases, but we need to bring costs in line," said Interpublic Chairman-CEO Michael Roth in a call with analysts.

Double-digit margins
Interpublic has said it wants to reach double-digit operating margins as well as competitive revenue growth by 2008. To that end, Mr. Mergenthaler said he is pushing CFOs at individual operating units to control costs.

Mr. Roth said that McCann Worldgroup and FCB turned in strong performances on increased client spending, while Deutsch saw a decline because of client losses from last year. Interpublic's troubled media-buying and planning operations also posted revenue declines because of client losses, though Mr. Roth said he was cheered by Initiative's recent win of CBS's media business.

Draft, FCB issue
Echoing previous public statements, Mr. Roth said Interpublic continues to mull an alignment or combination of marketing services agency Draft and traditional ad agency network FCB.

He didn't elaborate on the likely shape of such a move, but Mr. Roth did reveal more insight into the motivations behind it. He said the discussions were driven more by changing client needs rather than by eliminating costs or improving weak assets by lashing them to strong ones, as Interpublic has done in past agency mergers.

He said part of the ongoing analysis involves looking at client conflict issues, noting it wouldn't make sense to create an organization that creates loss because of conflict.
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