Shop Makes Hires, Slosberg Set to Retire as Forms Reveal Losses
BOSTON–Seeking to shore up its senior-management ranks as it moves toward an initial public offering, Digitas last week named Michael Goss chief financial officer and Robert Galford executive vice president of worldwide human resources.
Goss was CFO at Playtex Products, Westport, Conn. Galford was managing director at Counsel to Management, Concord, Mass., where he consulted on performance issues to professional-services and technology firms.
As these officials arrive, longtime creative head Mike Slosberg said he will resign by year’s end. Slosberg will lead the 50-person London office until getting a replacement for Alistair Ross-Russell, who recently stepped down as U.K. president. Ross-Russell could not be reached.
The 1,200-person Digitas was formerly known as Bronnercom. In December, it filed a registration statement with the Securities and Exchange Commission for a proposed IPO [Adweek, Jan. 3].
New Digitas CFO Goss replaces Meryl Beckingham, who unexpectedly resigned in December after less than two years. Agency officials declined to comment on her departure; she did not return calls.
“Probably the underwriters [of the IPO] did not feel comfortable with her bandwidth” in terms of overseeing the financial dealings of a public firm, said Skip Pile of consulting firm Pile and Co., Boston. Goss’ experience at a large public company is “exactly what the Street wants,” Pile added.
Digitas chairman David Kenny praised Goss as an “incredibly talented, well-credentialed” executive. Goss is expected to receive equity.
Under Goss, Playtex has performed solidly, reporting revenues of $588 million and income of $33.3 million through September 1999. That represents 15 percent and 17 percent increases, respectively, compared with the same period in 1998.
Slosberg is not listed as a Digitas executive officer, and his ownership standing is not detailed in the SEC filing. He is believed to own less than 5 percent of Digitas’ common stock. He joined founder Michael Bronner 13 years ago when the Boston shop was known as Eastern Exclusives.
Digitas wants to raise $200 million with its IPO; Morgan Stanley Dean Witter is lead manager. About $69 million will repay debt accrued through a late-1998 recapitalization engineered by San Francisco investment-firm Hellman & Friedman. The remainder will be used for “general corporate purposes,” per the filing.
Bronner, 40, is scaling back at Digitas, taking the title chairman emeritus. He will remain a board member but plans to launch a new Net venture: Lifetime Rewards.com. Bronner retains 3,554,760 shares of Digitas’ common stock, making him the second-largest shareholder, after Hellman & Friedman, which owns 18,449,578 shares.
Bronner gained nearly $123 million in 1998 when he sold shop shares to Hellman & Friedman and other investors, per the SEC filing.
Bronner’s big payoff, combined with office openings and investments in computer networks, likely account for Digitas’ surprising losses in recent years, said sources.
According to the filing, Digitas showed a loss every year since 1994 and reported a loss of $19 million on revenues of $134 million for the first nine months of 1999.
Another point of some concern, analysts said, is the fact that 62 percent of Digitas’ revenues come from its three largest clients: American Express, General Motors and AT&T. But the shop has gained work recently from Amazon.com, Industry to Industry and Sears.
Analysts split on whether the numbers will negatively impact the IPO. One New York analyst said it is not unusual for agencies to incur losses during periods of rapid growth. However, Bill Montbleau of Montbleau Associates, Burlington, Mass., said he was “shocked” by the numbers, especially since Digitas’ areas of expertise–direct- and Internet-marketing services–usually make money.
DIGITAS BY THE NUMBERS
Founded: in 1980 as a one-man discount-coupon operation by then Boston University student Michael Bronner
Headquarters: Boston, with offices in New York, San Francisco, London, Salt Lake City
Operating units: BSH, Sansome (direct marketing); Strategic Interactive Group (Internet services)
Competitors: Agency.com, Ogilvy One, Razorfish, USWeb/CKS, Wunderman Cato Johnson
Filed with SEC for proposed IPO: in December 1999
IPO goal: $200 million ($69 million for debt, other funds for general operations)
Proposed symbol: DTAS, Nasdaq Exchange
Revenues (Jan to Sep 1999): $133.9 million
Net loss (Jan to Sep 1999): $18.9 million
Largest clients: American Express (24% of revenues); General Motors (22%); AT&T (16%)
Ownership: Hellman & Friedman, San Francisco (72% of common stock); Michael Bronner (14%); David Kenny (11%); H&F Orchard Partners (5.4%); Kathy Biro (3.5%); H&F International Partners (1.6%); Michael Ward (1.2%)
Source: Form S-1, Securities and Exchange Commissio
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