NEW YORK Although Interpublic Group hit its operating margin and organic growth targets for 2008, it came against the backdrop of significant client retrenchment at the end of the year.

Client belt-tightening has continued since then, forcing IPG CEO Michael Roth to acknowledge to industry analysts that 2009 will be a year of maintaining, rather than growing, IPG's 8.5 percent margin. And to accomplish that, IPG agencies will focus increasingly on costs, which will likely mean more layoffs.

"What we've shown is we've been quick to react to taking costs out of our business," Roth said last Friday during an hour-long call with analysts. "And therefore, we expect, as the revenue declines persist, [that] we will be taking actions in the first quarter. Obviously, salary is an important part of that. So, we do expect to see" more layoffs.

And while Roth hasn't made any predictions about client spending levels this year, he appears to be bracing for the worst. In reply to a question about margins, he said: "If revenue declines in the range of, conservatively, 2 to 3 percent, we think we can maintain margins by taking actions early on. If the revenue deteriorates at a greater rate than that, obviously we'll be hard-pressed to maintain our margins."

Even at 8.5 percent, IPG's margin lags far behind those of competitors such as Publicis Groupe (16.7 percent) and Omnicom Group (12.6 percent).

Roth, now in his fifth year as CEO, used words like "cautious" and "very measured" to describe how clients are spending thus far this year. "Within client sectors and geographies, there's still a high degree of variability in terms of how clients are behaving," he said.

In Asia and Latin America, for example, IPG is still expecting growth, but at much lower rates than in recent years. In contrast, he sees "softness" in "larger, developed" European markets, such as the U.K. and Germany.



Like Omnicom, IPG attributed its fourth-quarter decline in organic revenue to less project work, particularly in the realm of events. Organic revenue slid 2 percent or $44 million in the quarter and roughly half of that falloff was due to "pressure on our events business," said chief financial officer Frank Mergenthaler.

Other factors that the CFO cited were the "deteriorating macroeconomic environment" and the steep decline in automotive spending. IPG, like WPP Group and Omnicom, counts a car company among its top clients. General Motors is IPG's largest client, representing, by one analyst's estimate, more than 5 percent of the company's worldwide revenue, which totaled $6.96 billion at the end of last year.

While Roth didn't confirm that estimate, he did put a number on IPG's current "exposure," or the value of the GM work that IPG's agencies have either completed or are about to complete: $150 million. IPG typically doesn't provide figures related to specific clients, so Roth broke with past practice. But clearly he wanted to minimize any concerns investors have related to GM, which is struggling to stay afloat through massive cost cutting and loans from the federal government.

The uncertainty surrounding 2009 casts a pall over some encouraging full-year results. Net income more than doubled last year to $265 million on revenue growth of 6 percent. Organic revenue grew 3.8 percent, outstripping the performance of Omnicom (2.9 percent) and matching that of Publicis. Despite the positive signs, however, IPG's stock continued to trade in the $3-4 a share range last Friday, on above-average volume of 13.8 million. The stock closed at $3.81, up 7 percent from Thursday's close of $3.56, according to Yahoo Finance.