OMNICOM CEO ATTACKS 'WALL STREET JOURNAL'

Wren Alleges Story That Caused Stock Drop Was Inaccurate

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NEW YORK (AdAge.com) -- Omnicom Group went on the defensive today after its stock dropped to its lowest level in four years following a Wall Street Journal story that raised questions about its accounting of acquisitions and spin-offs.

The stock slumped to $51.51 in mid-morning trading before closing at $62.28, down 19.7% for the day in record trading volume.

Conference call
In a hastily arranged conference call with investors, President-CEO John Wren and Chief Financial Officer Randall Weisenburger defended Omnicom's accounting practices and attacked the Journal story, which Mr. Wren said was filled with innacuracies and "innuendo."

However, management vowed to increase disclosure and improve investor communications.

"Our integrity ... is paramount to what we are and what we try to do," Mr. Wren said. "We will do whatever we need going forward to rebuild whatever confidence was lost because of this article."

A key point in the

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article was Omnicom's calculation of organic growth, considered aggressive compared to rivals Interpublic Group of Cos. and WPP Group make their determinations. Although the executives did not give a number, they maintained Omnicom would have shown organic growth in 2001 even under a less-aggressive calculation. (Organic growth refers to revenue growth excluding acquisitions.)

Mr. Weisenburger noted that new acquisitions are expected to show revenue growth from the start, so including their post-acquisition revenues in Omnicom's organic total is in keeping with that expectation. If client conflicts and account losses were expected, it would be beneficial to keep them out of the totals, he said.

Resignation sparks rumors
The Journal story had been the subject of investor speculation after board member Robert Callander resigned last month. Mr. Callander, head of the board's audit committee, reportedly stepped down after disagreeing with management over its limited disclosure of Omnicom's stake in Seneca Investments LLC, an e-services holding company formed last year.

Seneca was formed by investment group Pegasus Investors II after Omnicom traded its stake in Communicade -- a wholly owned subsidiary that functioned as a holding company for its investments in 16 online shops -- in exchange for preferred stock in Seneca. Omnicom has not spelled out what size stake it owns in Seneca, but its 2001 annual report valued the equity at $280 million. Mr. Wren was quoted in the Journal as saying he is negotiating to acquire two of the e-shops in Seneca, Agency.com and Organic.

"Seneca was not financially engineered," Mr. Wren said, refuting allegations that the partnership allowed Omnicom to avoid writing off losses in its Internet investments. He and Mr. Weisenburger stressed the company has succeeed in restructuring the interactive shops and both Agency.com and Organic are profitable.

No success with own i-shops
Omnicom has not been as succesful in creating its own online agencies, but it would like to acquire them at the right price, Mr. Weisenburger said. He said Agency.com now generates $100 million in annual revenue and is placed fifth among online agencies, while Organic generates $50 million in revenue, and both share clients with Omnicom shops.

"These are quality companies ... yeah, we'd like to own them," he said. But he stressed the "right price" will be the key factor in negotiations.

Merrill Lynch & Co. analyst Lauren Rich Fine reaffirmed her "strong buy" rating on Omnicom, saying the article did not uncover any news investors were not aware of and the accounting issues did not negate Omnicom's growth record.

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