Hi Jay, this is the nature of IPG's problem, your average, run of the mill profit shortfall, market downturn and accounting games:
search.ft.com
Interpublic drops 34% on results warning
By Christopher Grimes in New York
FT.com site; Oct 17, 2002
Shares in Interpublic Group, the world's second-largest advertising company, fell 34 per cent after it warned of lower earnings and revealed new accounting problems.
Interpublic said its earnings in the third quarter would fall as much as 71 per cent below forecasts. Analysts said they were surprised by the size of the earnings shortfall, which comes as some US television and magazine groups say they have seen slight improvement in the advertising market.
Interpublic's woes stretch well beyond the recent problems in the advertising market, however. The group is working to reverse deep problems at a sports marketing group called Octogan. And its public relations business is suffering from cutbacks in corporate spending.
A troubling side issue has been Interpublic's discovery of improper accounting, first revealed in August. The company said late Wednesday that it had uncovered an additional $50m in charges that had been booked improperly. In August, Interpublic said that the European offices of its McCann-Erickson agency had improperly accounted for $68.5m in charges, prompting an internal inquiry. The company now expects to restate $120m of charges that had been booked inappropriately.
IPG's third-quarter weakness was due largely to Octagon Motor Sports, the troubled sports marketing group. That unit, which was acquired two years ago, is expected to account for half of the earnings shortfall. Interpublic recently fired the Octagon management team to improve results at the unit, which operates racing facilities in the UK and Hong Kong.
IPG's "corporate identity" units - which boomed when mergers and initial public offering activity was high - experienced "significant deterioration" in the third quarter, the company said.
IPG also continues to suffer from weakness at its public relations agencies, which have seen a sharp decline in technology and financial services clients. Analysts said the group's staff levels have been too high given the weakness in the market, but the company has begun to reduce headcount in these units.
IPG said its units in Japan and Latin America, which together make up about 7 per cent of its revenue, are also suffering due to overall economic weakness in those areas.
Interpublic shares were down $5.56, or 34 per cent, to $10.47 during Thursday afternoon trade in New York. The stock is down 65 per cent this year and it at its lowest level in eight years. |
