San Fran shops brace for aftershocks

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The San Francisco advertising community, already rocked by staff layoffs of 10% or more at major agencies, is poised for an aftershock-this time from seemingly inevitable agency consolidation.

Interpublic Group of Cos. will add one more key brand to the assortment after its purchase of FCB Worldwide parent True North Communications, expected to be completed late next month. Agency executives bet Interpublic will combine some San Francisco holdings as it looks for ways to make the acquisition pay off in a slumping market with too many agencies and too little business.

One shop fell last week, as Interpublic's Lowe Lintas & Partners, San Francisco, shut down following the departure of key clients. The office employed some 27 people. Lowe's big blow came when it lost the $100 million Sun Microsystems account as a result of a conflict with another Lowe client, Dell Computer Corp., handled out of New York. (Lowe recently lost Dell.)

TECH SLOWDOWN BLAMED

John J. Dooner, Interpublic chairman-CEO, said Interpublic is not specifically examining San Francisco for consolidation.

"We're not isolating San Francisco as a market," he said. "We constantly review our companies and how they're doing, and if they're strategically right. There's not a focused effort only on the West Coast at this point in time, but a continual review here and around the world."

Mr. Dooner acknowledged the troubles San Francisco is having with the tech slowdown. "The result is that everyone is looking in the market to see how to most effectively do business there. ... The headline to me is San Francisco will remain a vital advertising community. But there's no question right now there's a re-examination within the industry as a result of significant changes in the technology field and of course the dot-com bubble."

Interpublic has moved in the past to merge shops. On a big scale, it combined Lowe & Partners/SMS and Ammirati Puris Lintas to form Lowe Lintas in 1999. On a smaller scale, it folded longstanding San Diego shop Phillips Ramsey into Campbell Mithun's Orange County, Calif., office.

At least two Interpublic West Coast shops are thriving: McCann-Erickson, San Francisco, anchored by the $350 million Microsoft Corp. account, and Deutsch, Playa del Rey, Calif., agency for Mitsubishi Motor Sales of America. But a number of West Coast shops in the Interpublic portfolio-or coming in-aren't faring as well.

FCB Worldwide, San Francisco, long one of the largest agencies in the West and once one of the city's creative pillars, this month said it had cut staff by about four dozen employees after FCB consolidated the Compaq Computer Corp. account in New York. AT&T Corp.'s AT&T Wireless, handled by FCB's San Francisco office, also put its account into review, with FCB, New York, defending.

FCB executives, citing the San Francisco office's work on such key accounts as Levi Strauss & Co.'s Dockers and Slates brands, have repeatedly denied speculation in the ad community that the office will close.

Stuart Ross, senior VP-director of PR, FCB Worldwide, stressed: "We have absolutely no plans to close our San Francisco office."

LOTS OF SPECULATION

Other Interpublic shops in San Francisco include GMO/Hill Holliday, the consolidation of Goldberg Moser O'Neill and Boston agency Hill, Holliday, Connors, Cosmopulos. GMO/ Hill Holliday earlier this year cut about one-third of its staff. It is expanding on the interactive front with the acquisition of local i-shop SF Interactive, though completion of the deal was delayed to June from April, according to SF Interactive President-CEO Bruce Carlisle, who will be exec VP-managing partner at GMO/Hill Holliday.

A number of other Interpublic agencies have opened separate outposts in the city-the Martin Agency, Richmond, Va., and Suissa Miller, Los Angeles, among them. Other Interpublic entities also operate in San Francisco, including direct and i-shop Lowe Live, formerly Miller/Huber Relationship Marketing.

All of this gives Interpublic a lot of doors into an ad community hit hard by the collapse of dot-coms and slump in technology. That's led to speculation that Interpublic will rejigger operations. One executive at a San Francisco Interpublic shop expects consolidation, but added of Interpublic's managers: "They're not talking about it."

While Mr. Dooner said Interpublic isn't studying San Francisco specifically for consolidation, he noted the company is evaluating the issue of real estate. FCB's San Francisco office, for one, is near the end of its lease and is looking for space. "There are really two points of cost. The most significant are of course the real estate and the employees," Mr. Dooner said. "So in examining any organizational or managerial situation we look at both of those."

Other holding companies are experiencing West Coast tremors of their own. WPP Group's Ogilvy & Mather office in San Francisco, reporting to the New York office, closed earlier this year, less than a year after opening and after hiring two high-profile creatives, Greg Ketchum and Dennis Lim, formerly creative directors at Publicis Groupe's Publicis & Hal Riney.

Outside of the holding companies, a number of San Francisco shops already have begun to consolidate. Pickett Advertising acquired Winkler Advertising, while Gardner Geary Coll combined with Katsin/Loeb.

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