Another year, another fiasco for IPG

Meets low expectations, but Cyprus is out, and credit rating lowered again

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Last week's financial results were deja vu all over again for Interpublic Group of Cos. The third-largest ad holding company, struggling to turn around after years of accounting and operational difficulties, once again posted troubling numbers and once again announced the departure of a high-ranking financial manager.

In a call with analysts, Chairman-CEO Michael Roth said Nick Cyprus, who was Interpublic's highest-paid employee in 2004 when he was brought in from AT&T to help clean up the company's books, is leaving. He said Mr. Cyprus will be replaced by McCann Worldgroup Controller Christopher Carroll. Mr. Roth did not say why Mr. Cyprus is leaving or where he is going and an Interpublic spokesman declined to comment.

Since 2002, Interpublic has been trying to right bookkeeping issues that emerged following its late-1990s acquisitions spree and that kicked off an ongoing investigation by the Securities and Exchange Commission. That effort hasn't been helped along by frequent changes in its financial management. When current Chief Financial Officer Frank Mergenthaler joined last year, he became the fourth CFO in as many years.


Mr. Roth acknowledged "disappointing financial results." Interpublic, which said its weakness in financial controls continues, March 22 reported full-year 2005 revenue of $6.3 billion, down slightly from the year before. Its net loss narrowed to $289 million from $558 million in 2004. For the fourth quarter of 2005, revenue decreased 1.7% organically to $1.9 billion. It posted a net loss of $34.2 million compared with net income of $125.3 million over the same period in 2004.

The news was, by and large, in line with the expectations of analysts, who are generally cautiously optimistic about the company's turnaround prospects.

However, hours after Interpublic released its results, Standard & Poor's lowered its credit rating one notch to B, deep in junk bond territory, and put Interpublic on CreditWatch to signal another downgrade may be ahead. "The downgrade recognizes the declines in Interpublic's core business and Standard & Poor's reduced confidence in the company's prospects for cash flow generation," S&P analyst Alyse Michaelson Kelly said in a statement.

contributing: bradley johnson
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