The Moneymen: Sean Orr

Last year was difficult for any Madison Avenue CFO, but Interpublic Group of Cos.’ Sean Orr unquestionably had the toughest time. An industry outsider, he was part of the freshman team atop IPG. He and new CEO John Dooner undertook a major corporate restructuring and difficult integration of True North while coping with the severe industry slowdown. While most CFOs enjoy the anonymity of the back office, Orr found himself under a harsh spotlight.

“It’s been a tough year,” Orr acknowledges. “It’s times like these when you prove yourself. But in some cases, what it probably did was force us to take harder actions than we might have otherwise. Do I care what some aggressive sell-side analyst says? If I wasn’t doing the right thing, doing what is successful over the long run—what John and the board want—I’d feel pressure. But John and I aren’t here for 15 minutes. I’m more interested in the stock price and corporate performance two years from now.”

Dooner and Orr may be on their way to that turnaround. IPG’s stock price, which had been trading at 52-week lows last August, has sprung back 53 percent to around $28. Improbably, the first signs of new investor confidence came in November after Dooner and Orr announced IPG’s largest quarterly loss ever, $477.5 million, or $1.29 a share. After early missteps in their communications to Wall Street, the two executives hit their stride in a conference call explaining their efforts to stem the flow of red ink at the industry’s largest marketing-services company and convincing analysts the worst was over. Last year, IPG implemented restructuring initiatives aimed at annual savings of $300 million.

“Cost containment is just a way of life in this business,” says Orr. “When your revenue drops, you watch your costs.”

In 2001, IPG took charges of $950 million for restructuring costs and goodwill, writing them off in the second and third quarters. The $7 billion company says it is finished taking such charges needed to shore up its balance sheets. That won’t be enough to mask a disappointing year. When IPG announces its 2001 earnings this week, it is expected to report earnings of 95 cents a share, compared to $1.53 a share in 2000, according to analysts’ consensus developed by First Call.

Orr, 47, was controller at PepsiCo before joining IPG in June 1999. He succeeded the company’s legendary CFO, Gene Beard, who had worked closely with former CEO Phil Geier. As the economy tanked last year, Orr had to deal with the lagging fortunes of IPG shop Lowe and the holding company’s subsequent restructuring. He was also faced with folding in the $1.7 billion True North acquisition, which was fraught with client defections. Among the conflicts at TN’s Foote, Cone & Belding advertising unit were $650 million in billings from Pepsi and Reckitt-Benckiser.

Orr was also stung by bad publicity that erupted after a published report quoted him as saying he was pruning IPG’s portfolio of holdings. Orr claims he was misquoted, but Dooner still had to publicly deny any sale of assets. Not long after that, Orr stirred more controversy when he surprised Wall Street by issuing an unexpected profits warning. He admits he got off to a rocky start at IPG. “Whose fault is it?” he asks. “I place it a little on past decisions, a little on the eco nomy, a little on me and John.”

For his part, Dooner says Orr has his full support. “You have a fresh CEO and CFO at a time when there are a lot of complicating issues in the marketplace and around [IPG]. It really tests your mettle,” Dooner says. “We’ve come out stronger, we’ve learned a lot.”

Orr says his move to IPG did not require a big adjustment, given his experience. The summa cum laude graduate in mathematics spent 15 years at KPMG Peat Marwick, where as a partner he worked with clients including Revlon and Singer. In 1990, he worked as controller for former KPMG client Reader’s Digest. He left to become CFO at Frito-Lay, where he was involved in deals like the acquisition of the remaining snack assets of Anheuser-Busch. He later moved to Frito-Lay’s parent, PepsiCo.

“As a business model, KPMG is very similar to an agency in terms of how you make money, how you run operations with people being your assets,” says Orr. “After KPMG, I was in a company [Reader’s Digest] that derives an important portion of revenue from advertising. With Frito-Lay, I worked in a company that was one of the biggest brands in the world and spent $1.2 billion a year buying the services an IPG provides.”

An avid traveler, Orr has visited every continent but Antarctica. Perhaps most surprising to discover about a hard-edged numbers guy is his love of ballroom dancing. He and his wife participate in two or three competitions a year.

“Sean’s a bright, top-drawer CFO. But he’s also very engaging as a person,” says Deutsch CEO Donny Deutsch, who sold his shop to IPG in 2000. “He’s very approachable, with a great manner.”

That sentiment wasn’t initially shared by Wall Street. “The problem for Sean may be that he’s not been monitoring models in forecasting on a quarterly basis. He’s been focusing more on an annual basis,” says Michael Russell, an analyst with Morgan Stanley Dean Witter. “IPG is going through a transition, and it’s natural that he might look more long term, but I’d be more comfortable with a focus on quarterly results.”

Orr brought in investor relations pro Susan Watson, a colleague from PepsiCo who has already made a difference, if IPG’s successful third-quarter conference call is any indication. (Despite revealing its worst quarterly results ever, the company saw its stock jump 22 percent the next business day.)

“Going forward, we’ll execute against the strategy we’ve put in place,” says Orr. “We’ve set up integrated groups in response to what the marketplace is looking for.”