World: Stuart Elliott in America

Americans used to joke that the quintessential article you could find in Reader's Digest magazine was titled: "New Hope for the Dead."

Speaking of which, let's congratulate the Interpublic Group of Companies on its earnings report last week.

OK, it's a cheap shot. IPG is no closer to death than McDonald's is to bringing out Super Supersize fries and Cokes. But a year ago, when in a remarkable shake-up the board of directors ditched John Dooner as the chairman and chief executive and replaced him with David Bell, the vice-chairman, its prognosis was gloomy. Now, as Bell marks his first anniversary at the helm, the forecast is improving.

Though IPG reported a net loss for 2003 of $451.7 million, $102.5 million of that incurred in the fourth quarter, Wall Street analysts who follow the company's stock performance pointed to several notable achievements.

For one thing, IPG has reduced significantly its net debt, to $468.6 million from $1.7 billion at the end of 2002. For another, operating margins in the fourth quarter improved to 9.2 per cent, compared with 6.7 per cent in the same quarter of 2002. Shareholder lawsuits over accounting irregularities and earnings restatements are being settled, once and for all. And troubled racetracks in Britain, operating at a loss, were disposed of, along with other ill-fitting holdings acquired during the takeover frenzy of the late 90s but now considered outside the realm of IPG's areas of expertise.

"There are signs of progress," the analyst Ed Atorino told The Wall Street Journal. Lauren Rich Fine of Merrill Lynch echoed that in an interview with Bloomberg News, citing "visible signs of progress" as a result of senior managers starting to focus on "what is in their immediate control" and improving matters "swiftly". Another analyst, Joseph Stauff of Schwab Soundview Capital Markets, wrote that the fourth-quarter numbers provided "the first evidence the Street has seen" that IPG is "approaching normalised margins".

All those kind words had their effect. As the Dow Jones average fell 0.7 per cent on 9 March, the day IPG released the report, its shares rose 2.8 per cent. And media coverage of the results was upbeat, a welcome change for executives and employees following quarter after quarter of gloom and doom. "Interpublic turnaround effort advances," Reuters headlined its wire story and the sub-head on the story on Ad Age's website read: "Management optimistic for turnaround this year."

For all the happy, shiny aspects to the report, however, the analysts also sounded cautionary notes. Michael Russell of Morgan Stanley expressed disappointment at a sudden reticence by Bell and Christopher Coughlin, the relatively new chief operating officer and chief financial officer, to quantify net new-business wins last year, describing it as a loss of "a forward-looking metric" useful in assessing how Interpublic may fare in 2004.

Even the executives, during a conference call with the analysts, took pains to try curbing any irrational exuberance about IPG's prospects.

"Six months into a 24- to 36-month turnaround plan," Bell said. "I'd caution that we cannot be sure we'll see such dramatic improvements every quarter" as there were in the fourth quarter.

They say the journey of a thousand miles begins with a single step. That's definitely true these days travelling on Madison Avenue.

- Stuart Elliott is the advertising columnist at The New York Times.

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