Eskandarian returns: Arnold sets course to rebuild

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In the three years since Ed Eskandarian left day-to-day operations at Havas' Arnold Worldwide, the agency has defended business as never before, lost long-standing clients and fallen short in $900 million in reviews last year alone. It also experienced its first layoffs and lost top executives.

Now, after an thwarted stint trying to mold Arnold into Havas' second network, Mr. Eskandarian is back regrouping an agency wracked by internal angst. On the agenda: bolstering client relations and bringing in new ones, integrating Arnold's four offices, strengthening its New York outpost, and rounding out the executive ranks after laying off 150 people, or 10% of its staff.

Some of the rebuilding has already begun. The agency last week named John Staffen as executive creative director in New York, replacing Rochelle Klein, and later this month will announce other high-level hires in New York, Boston and St. Louis. It's also in six pitches worth a combined $100 million, and it hopes that two will have borne fruit by late February.

The country's 18th largest agency in 2002, Arnold had $105.6 million in revenue that year-a 5% drop. Last year is thought to have been flat to down across the domestic organization and its international Arnold Worldwide Partners. Mr. Eskandarian would only say that this year he hopes for 10% billings and revenue growth.

"I'm going to do whatever I have to do. If I have to figure out a strategy for a client, I'll do it. If I have to pitch a piece of business, I'll do it," said Mr. Eskandarian, a dry cleaners' son who is highly respected, even beloved, within the agency.

A new-business titan in the late 1990s, Arnold has been jilted in more than $900 million in major and minor reviews across most categories the past few years. Last year alone, the agency lost out on Sabre Holdings Corp.'s Travelocity, Nextel, Turner Broadcasting System, Cotton Inc., Celebrex and other Pfizer drugs, Polaroid Corp., Nikon, Andrew Jergens Co., Delta Air Lines' Song, Capital One, American Heart Association and the Federal Emergency Management Agency's flood program.

In December, Interpublic Group of Cos.' Campbell Mithun edged out Arnold for Indigo Palms, a division of Oxford Industries' Tommy Bahama.

limited bragging rights

Now it's going after Pfizer's migraine drug Relpax, is pitching four new accounts and is defending FMR Corp.'s Fidelity Investments and Welch Foods. Arnold said Welch has been reviewing all its suppliers, and 2003 happened to be its turn. The agency lost soy milk Silk and Monster Worldwide last year, and bragging rights were limited to Amtrak's $18 million business. Many of its wins were in the interactive and promotions area, with fees topping out at $2 million and $3 million.

One former executive said Arnold is suffering because it did not take a breather to digest its new business. Mr. Eskandarian, who owns a slice of the Boston Red Sox, however likened Arnold's stumble to a slugger's dry spell.

"We've just got to get our timing back. It's like a batter who was hitting .350 and then hit a bad [stretch]," he said. "There really isn't anything terribly wrong. ... We had such a long winning streak that when it stopped, people wondered why."

Chairman-Chief Creative Officer Ron Lawner, who had run Boston with President-Chief Operating Officer Fran Kelly, will concentrate on creative and pitches rather than strategy and financial aspects of the business. Mr. Kelly again will focus on new business. With an MBA from Harvard, he is creating a strategic business group on the order of consultants like McKinsey & Co. and staffed with MBAs and a Ph.D.

In September 2000, parent Havas planned for Arnold to be its second global network with operations in 15 to 20 countries. But the wobbly economy, stagnant stock prices and continued client pressure on fees upended that. So in July, the Paris-based company said Arnold instead would become a creative alternative in select countries with Euro RSCG Worldwide its sole global network. Now, Arnold will be in 10 to 12 of the largest ad markets-including Europe, China and Australia. While there is talk that Havas has been approached about selling Arnold, it has signaled no interest at this point.

The agency will not expand domestically beyond its Boston, New York, St. Louis and McLean, Va., operations. Several marketing-services offerings that had been part of Arnold for three years will fold into Euro or be sold. Disciplines such as direct, public relations, brand promotions, design and interactive will go in-house.

lost in the machine

One of Arnold's greatest assets-its Volkswagen of America account-may also haunt it. One marketer who has worked with Arnold said that the agency needs a deeper track record beyond VW-and lay low on the stale VW references that permeate every pitch, review and conversation. A consultant said new-business prospects might fear getting lost in the VW machine.

However, Larry Light, chief global marketing officer for McDonald's Corp., said he's impressed with Arnold and that the agency applies "the same thought to us on a regional basis that they apply to a national account like Volkswagen."

Despite Arnold's continuing supply of awards, a second consultant maintained it has lost a bit of its creative touch.

But Judy Neer, exec VP-managing partner at the Boston consultancy Pile & Co., believes Arnold's problems are superficial. She said the agency remains solid and that it had just run into a bit of bad luck on new business.

Barbara Reilley, exec VP-group director, said the agency's rocketing growth had diverted Arnold and that it would benefit from Mr. Lawner's redeployment to creativity and Mr. Kelly's laser aim on new business.

"I'm not saying Ed is a magician," Ms. Reilley said, "but he's dusted off all the talent and passion and incredible talented people and is bringing a lot of new energy."

contributing: claire atkinson, emma hall, kate macarthur

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