Goss Joins Company as CFO; Slosberg Prepares to Retire
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 had been CFO of Playtex Products in Westport, Conn. Galford was managing director of Counsel to Management in Concord, Mass., where he consulted on performance issues to professional services and technology firms.
As these executives come aboard, longtime creative head Mike Slosberg, who helped build the Boston relationship marketing firm, said he will resign by year's end. Slosberg, in his mid-60s, will stay on to lead the 50-person London office until he chooses a replacement for Alistair Ross-Russell, who recently stepped down as U.K. president. Ross-Russell could not be reached for comment.
The 1,200-person Digitas organization was formerly known as Bronnercom. The company filed a registration statement in December with the Securities and Exchange Commission for a proposed IPO [Adweek, Jan. 3].
New Digitas CFO Goss replaces Meryl Beckingham, who unexpectedly resigned from the agency in December after less than two years with the company. In the midst of an IPO, her resignation took many observers by surprise.
Agency officials declined to comment on her departure or address IPO-related issues. Beckingham 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, suggested Skip Pile of consulting firm Pile and Co. in Boston. Goss' experience at a large public company is "exactly what the Street wants," Pile said.
Playtex has enjoyed solid financial performances of late, reporting revenues of $588 million and income of $33.3 million through the first nine months of 1999. Those numbers represent increases of 15 percent and 17 percent, respectively, compared with the same period in 1998.
Digitas chairman David Kenny praised Goss as an "incredibly talented, well-credentialed" executive. Goss is expected to receive equity.
Slosberg is not listed as an executive officer of Digitas and his ownership standing is not detailed in the SEC filing. He is believed to own less than 5 percent of the firm's common stock. Slosberg joined agency founder Michael Bronner 13 years ago when the Boston shop was known as Eastern Exclusives.
Digitas is looking to raise $200 million with its public stock offering; Morgan Stanley Dean Witter is lead manager. Approximately $69 million will be used to repay debt accrued through a late-1998 recapitalization engineered by San Francisco investment firm Hellman & Friedman. The rest of the funds will be used for "general corporate purposes," according to 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 Internet venture called Lifetime Rewards.com. Bronner retains 3,554,760 shares (14 percent) of Digitas' common stock, making him the second-largest shareholder after Hellman & Friedman, which owns 18,449,578 shares (72 percent).
Bronner received nearly $123 million in 1998 when he sold shares of the agency to Hellman & Friedman and other investors, according to the SEC filing.
Bronner's payoff, combined with office openings and investments in computer networks, likely account for Digitas' losses in recent years, said analysts and 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 (24 percent), General Motors (22 percent) and AT&T
(16 percent). Should any single client jump ship, revenues might suffer.
On the plus side, the agency has picked up assignments in recent months from Amazon.com, Industry to Industry and Sears.
Analysts were split on whether the financial numbers will have a negative impact on the IPO. One New York-based analyst said it is not unusual for agencies to incur losses during periods of rapid growth. However, Bill Montbleau of Montbleau Associates in Burlington, Mass., said he was "shocked" by the numbers, especially since the agency's areas of expertise--direct and Internet marketing services--are usually money makers.
Pile added: "I wouldn't buy stock in a direct marketing firm that's losing money. This isn't a dot.com company."