NEW YORK Interpublic Group today reported a $182.1 million net loss for the first quarter of 2006—compared to a $151.4 million loss in the same period last year—on flat revenue of $1.33 billion.
IPG attributed the loss in part to the rising cost of professional fees and salaries. (Professional fees, for example, totaled $90.7 million for the quarter, compared to $75.1 million in the first three months of 2005.)
Despite the flat overall quarterly revenue, organic revenue grew nearly 5 percent, due in part to increased spending by existing clients.
Though pleased with the company's organic growth, IPG CEO Michael Roth, during today's earnings call with industry analysts, said, "We are considerably less satisfied with the cost side of the story. This will be an area that [CFO Frank Merganthaler] and I will pursue with great focus and intensity. We must show improvement in operating margins between now and the end of this year."
Also during the call, Roth discussed the company's exploration of "aligning or combining two of our key assets under a single management team and go-to-market strategy," a reference to a possible merger between Draft and Foote Cone & Belding [Adweek Online, April 26].
"Both of these companies are doing well in the marketplace—and both could be doing even better with access to capabilities or geographic reach that the other would bring to the table," Roth said.
"The only compass we will use to guide our thinking about delivering better and more powerful integrated offerings to our clients is their needs. Not ours. So, unlike previous mergers undertaken by this company, a combination or alliance would not be about achieving size and scale, or about propping up a weak or non-competitive asset. It would be about being responsive to the needs of clients, who are asking for our help in connecting with consumers in a multi-channel media world," he said.
Roth said the cultures and offerings of the two companies are "highly complementary. The proof of this is in the fact that the heads of both agencies came to us independently to [suggest] the possibility of a closer working relationship. And the fact that the response from both their senior-most teams has been very supportive.
"As is the case in any significant move of this nature, a great deal of due diligence, planning and consideration needs to go into the process. It's unfortunate that our conversations made it into the public domain prematurely, but that won't cause us to make a determination or move forward until we have thoroughly reviewed the financial and marketplace implications of a move. We expect to finalize our thinking in the upcoming few weeks."
In response to a question from Merrill Lynch's Lauren Rich Fine, Roth acknowledged that IPG is weighing the potential for client conflicts in its deliberations on a possible merger. "That's the most significant gating factor in whether we go forward or not," he said.