Inside the Q4 Earnings


NEW YORK Last week comparisons couldn't help being made between the fourth-quarter fates of the industry's second-largest player, Omnicom, and Publicis, behind it at No. 3. On Tuesday, Omnicom CEO John Wren, describing 2008's final quarter as the most-difficult period since 1992, said the company posted its first drop in net income in recent memory. A day later, Publicis CEO Maurice Levy said his business had still been growing amid the global meltdown. (Click here to read a Q&A with Maurice Levy.)

To be sure, the strengthening dollar hit Omnicom's bottom line even as it benefited Publicis' numbers. But the French holding company was still able to eke out 1.1 percent organic growth -- a measure that strips away currency fluctuations -- while its larger American rival posted a drop of 14 percent in net income in the quarter.

Aside from a stronger dollar, Omnicom cited a loss of year-end project work, primarily from its U.S. operations. Publicis, which derives a larger share of its revenue from digital and emerging economies, said those businesses helped to offset weaknesses elsewhere. Publicis' revenue in the quarter climbed 5.5 percent compared to Omnicom's decline of 7 percent.

Geography and technology certainly appeared to have worked in Publicis' favor in the fourth quarter. Omnicom derives nearly half of its revenue from the U.S. while Publicis rings up 43 percent.
"In a normal year, a couple of hundred million of revenue comes in as unbudgeted project work," said Randy Weisenberger, Omnicom's CFO. "You're always nervous because you can't forecast it and you hold your breath till it comes in. Last year, we were more nervous than usual and it didn't come in."

Deutsche Bank's Matt Chesler noted that Omnicom has more exposure in the U.S. to PR and speciality communications. For example, revenue at Omnicom's Bernard Hodes Group -- the country's largest recruitment company -- plummeted by almost a third. But Omnicom's CRM operations grew 3 percent, excluding the impact of currency.

Continue to next page →