Changes Brewing for Circle.com

Havas Advertising is aligning Circle.com, the struggling i-shop acquired last year in its $2.1 billion purchase of Snyder Communications, with its Euro RSCG Worldwide network.

In addition, Circle’s tracking stock will soon vanish from the Nasdaq Exchange. Havas plans to issue 1.95 million of its own shares to Circle.com stockholders in exchange for all of Circle.com’s tracking stock, which was launched in 1999 at the height of the Internet investment frenzy.

Based on the $14.81 closing price on Feb. 2 for its stock, Havas would exchange 0.0857 shares for each Circle.com share. Circle.com shares were trading last week at around $1.15. The stock’s 52-week high was $14.75 and its low was 41 cents. Paris-based Havas acquired all Snyder’s common stock in September.

“When we purchased Snyder, we thought it worthwhile to see if the delivery of those capabilities through a separate business unit such as Circle.com had strategic or financial advantages. We have concluded it does not,” said Alain de Pouzilhac, Havas chairman and CEO.

“The good news for Havas is they get Circle [shares] at a discounted rate,” compared to just a few months ago, said industry consultant Bill Montbleau of Montbleau Associates, Burlington, Mass. “The bad news is the future of these [interactive] divisions—how do you make money?”

Circle expects a net loss of about $16 million for fiscal 2000 on revenue of $67 million. Its debt is $58 million.

The Circle moves, subject to shareholder approval, are expected to be finalized before mid-year, said R. John Cooper, executive vice president/worldwide general counsel and managing director of U.S. headquarters for Havas.

No determinations have been made on staffing or whether the Circle brand identity will be retained, Cooper said. Baltimore-based Circle has more than 500 employees in 13 offices, including Boston, Atlanta, New York and Wilton, Conn. Clients include Volkswagen of America and Talbots.

The planned alignment resembles a move in October by Interpublic Group to align its struggling Zentropy Partners interactive unit with McCann-Erickson WorldGroup’s MRM Worldwide network. This trend will likely accelerate at large holding companies as the online market continues to sag, Montbleau said.

The Circle announcement came last week as New York-based Razorfish, which maintains a sizeable office in Cambridge, Mass., said it will cut 400 jobs, or 25 percent of its global workforce; and Boston-based Web consulting firm Viant reported a fourth quarter loss of $7.1 million, compared with a $3.7 million profit for the same period a year ago.