In David Bell's debut conference call with Wall Street in March, he made no excuses for Interpublic Group's dismal first-quarter results. The holding-company CEO made it clear everything at IPG was under evaluation.
Last week, as Bell faced growing responsibility for numbers that continue to disappoint, he hinted at the results of that evaluation, underscoring the need for accelerated change and promising top-management change at certain IPG operating units.
"As part of its turnaround plan, new management has begun to transform the company's culture, simplify its structure, significantly improve financial systems and recast leadership within a number of operating units," Bell told analysts in the second-quarter-earnings call on Aug. 12.
"The accelerating pace of change, relative to these priorities, will enhance long-term shareholder value but entail less short-term clarity and potentially higher costs," he said.
Particularly vulnerable is Mark Dowley, who runs IPG's Sports and Entertainment Group, sources said. Dowley is a protégé of former IPG CEO John Dooner—whom Bell replaced in February, with Dooner returning to his prior job as head of WorldGroup. Dowley is receiving some of the blame for losses he inherited at IPG's troubled MotorSports division.
Another IPG executive said to be under pressure is Jerry Judge, worldwide CEO of Lowe, who has struggled to reverse the fortunes of his agency. After describing the performances of Campell-Ewald, Deutsch and Hill, Holliday, Connors, Cosmopulos as "exemplary" to the analysts, Bell praised Lowe for "stabilizing" its business.
Without addressing Dowley and Judge specifically, an IPG representative said Monday, "The company has indicated only that we're constantly looking to add the best possible talent." During the call, Bell also mentioned new talent such as McCann's recent hiring of Rupert Howell and Bret Gosper.
While IPG's second-quarter results fell short of Wall Street's consensus, they did not surprise analysts, who said charges from ongoing restructuring efforts make it difficult to predict what impact that will have on the company's bottom line. IPG reported a net loss of $13.5 million in the second quarter, down from net income of $109 million in the year-earlier period. Operating earnings were hurt by a $105.4 million charge because of restructuring costs and impairment charges at MotorSports.
Revenue, boosted by the weak dollar, was nonetheless flat, climbing a scant 0.6 percent to $1.5 billion. In constant currency terms, revenue actually dropped 3.6 percent. On an organic basis, IPG's revenue fell 3 percent, although the company noted improvement in U.S. organic growth, which climbed 1.4 percent. International revenue slumped 8.1 percent on an organic basis.
The second-quarter conference call also marked the first public comments of new COO Chris Coughlin, who joined IPG in June and will assume outgoing CFO Sean Orr's titles and duties when he leaves this month. Coughlin took the unusual position of "withdrawing previous [IPG] earnings guidance," citing the company's ongoing restructuring efforts and challenging business environment. After miscommunication missteps with investors during the Dooner-Orr administration of IPG, many welcomed Coughlin's candor.
"Overall, I thought the call was sincere, because at the end, Coughlin took the forecasts off the table," said one source. "That was pretty honest, even though it can piss off the analysts."