IPG Puts Best Face Forward (Updated)

Interpublic Group’s Investor Day today was a largely blemish-free affair, chock-a-block with speeches, slides, video case histories and quips.
Naturally, worldwide CEO Michael Roth and the leaders of his global agencies aimed to impress the 200 or so shareholders, industry analysts, investment bankers, credit rating agency executives and reporters that gathered at the Times Center in midtown Manhattan. And compared to the last Investor Day—in March 2006—IPG at least had something to crow about, in terms of operating margin improvement (from 1.7 percent at the end of ’06 to 8.4 percent at the end of last year) and net income gains (from a $79.3 million net loss in ’06 to net income of $271.2 million last year).
Five years ago, IPG was synonymous with “beleaguered”—reeling from a $181.3 million accounting imbalance that stemmed from the overbooking of revenue and triggered a Securities and Exchange Commission investigation that the company had to pay $12 million in 2008 to resolve. Back then, Roth had been CEO for just a year, having replaced David Bell, who in turn had replaced John Dooner in 2003.
Today, Roth jokingly referred to the “good old days” of ’06, at one point flashing a slide that highlighted the myriad problems, including weak agencies, operating losses and noncompliance with the Sarbanes-Oxley Act. Now, while IPG’s financial house is generally in better order today, its share price of $12 and change is a fraction of what it was in the 1990s and early 2000s, though it’s up 19 percent from last Investor Day. Also, while its margin has improved, it still lags well behind that of its rivals.
Even the strategic moves that Roth touted today—including the 2006 merger of Draft and Foote, Cone & Belding, the 2009 marriage of Lowe and Deutsch and last year’s installation of a new CEO at McCann Worldgroup—acknowledge underperformance in the marketplace, though of course, Roth publicly would beg to differ. In a reference to Nick Brien replacing John Dooner as CEO of Worldgroup, the IPG boss insisted (with a straight face), “The Worldgroup wasn’t broken. It just needed to be transformed.”
Roth’s agencies also find themselves grappling with the loss (or potential loss) of major client business. This month, Universal McCann lost its North American media assignment from Microsoft—though the shop retained its overseas business—and Draftfcb is currently defending its lead creative status on S.C. Johnson, its largest global client. Ah, but for at least a day, such pock marks were barely acknowledged and quickly explained away.