IPG gets house in order for Wall St.

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Interpublic Group of Cos.' decision to hold off release of third-quarter results for another three weeks shocked neither investors nor analysts last week. Most observers interpreted the move as a sign management wants to get a firm grasp on financials and restructuring charges before meeting Wall Street.

Suspicions are strong that Interpublic will announce more layoffs and further restructuring costs with its earnings.

Interpublic originally was expected to release earnings this week alongside rivals Omnicom Group and WPP Group. Interpublic now won't show its numbers till the week of Nov. 12.

"I imagine it could be another $50 [million] or $60 million in charges in layoffs and severance over what was announced in the second quarter," said Michael Beebe, equity analyst at investment bank Goldman Sachs.

In late July, Interpublic said it would incur $500 million in 2001 restructuring charges following the acquisition of True North Communications and cost-cutting initiatives; it took $51 million of those charges in the second quarter.

While analysts lowered forecasts for agency companies after the Sept. 11 attack, most expect Omnicom to hit profit targets for the year, while they expect Interpublic to fall short.

Credit Suisse First Boston's David McMurry lowered `02 earnings estimates for Omnicom and Interpublic, but said, "Omnicom will lead the charge coming out of the downturn." Lehman Bros.' Kevin Sullivan forecast Interpublic will report "disappointing" new-business numbers for the third quarter.

Interpublic Oct. 2 fell to $18.25 a share, its lowest point since 1997, before recovering a bit; it closed Oct. 19 at $20.89. The stock has fallen 50.9% since John J. Dooner Jr. took over as chairman-CEO Jan. 1.

Omnicom in September slumped to $59.10, its lowest level since 1999; it rebounded but then fell back, closing last week at $70.89, down 14.5% since Jan. 1.

While Interpublic and Omnicom are neck and neck in revenue, the stock market values Omnicom at $13 billion-vs. the $7.8 billion market cap of Interpublic.

Standard & Poors Oct. 16 placed Interpublic on credit-rating watch with negative implications. Fitch Investments Services analyst Albert Turner, who last month downgraded Interpublic debt, said, "The events of Sept. 11 have only complicated some of the issues this company faces."

Following its June purchase of True North, Interpublic continues to deal with integrating operations amid the economic and ad slump. Interpublic announced July 26 it had cut or was cutting 5,500 jobs-about a 10% cutback.

Those reductions now appear insufficient. Executives at various Interpublic shops say Mr. Dooner now expects agencies to deliver operating margins of at least 20% going forward. "If they have to cut expenses, so be it," said an Interpublic insider.

At deadline, Mr. Dooner was not available for comment.

Uncertainty surrounding Interpublic puts the company under increased scrutiny. In a mid-October note, Morningstar analyst George Nichols wrote: "The firm has yet to get its house in order after enduring restructuring and several quarters of substantial `one-time' charges."

Contributing: Mercedes M. Cardona and Rich Thomaselli

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