OPINION: Stuart Elliott in America

Hell hath no fury like an analyst scorned. Or scarred. Or scared. That was the lesson learned once more by the Interpublic Group of Companies, when the world's second-largest agency company stunned Wall Street on 16 October with another earnings - or, more precisely, lack of earnings - bombshell.

It was deja vu all over again, to quote America's favourite baseball player-philosopher, Yogi Berra, because the warning was just one in a recent series from Interpublic's top managers. They've continually startled investors by disclosing that earnings would fall far short of their earlier estimates and, worse yet, the figures the analysts were expecting.

Interpublic's struggle to absorb True North Communications, made more difficult by the arduous amalgamation of Ammirati & Puris/Lintas/Lowe, was complicated further by several shocks in August. First came a delay in the release of second-quarter results. Then came word of a restatement of earnings stemming from the improper accounting of expenses. Next came the second-quarter numbers, truly an example of better never than late: earnings missed analysts' guesstimates by almost 20 per cent, a gap blamed on a surprisingly sub-par performance at the motor sports division of the Octagon sports marketing unit.

So it staggered the Street, not to mention Madison Avenue, when just two months later, Interpublic was at it again. The earnings estimates slashed this time were for the third quarter and all of 2002, blamed on a worsening of losses at Octagon Motor Sports, with the sluggish Japanese and Latin American economies tossed in for good, or bad, measure.

And remember, Interpublic asked, when we estimated in August that the earnings restatement for the improper expenses charges would be $68.5 million? Well, the auditors took another look and increased that figure to perhaps as much as $120 million.

The uproar approximated what would have happened if Coca-Cola executives ever had caught Marion Harper Jr, the founder of Interpublic, dancing with Joan Crawford at the Pepsi-Cola company picnic. Interpublic shares, battered in August, fell sharply, hitting lows not seen since the early 90s.

And what did the blindsided analysts have to say? Don't ask. "It's a disaster," Scott Black of Delphi Management said. The lowered estimates were "beyond comprehension", Lauren Rich Fine of Merrill Lynch added.

"We recommend investors remain on the sidelines until the company has posted several quarters of clean results," Troy Mastin of William Blair & Company said.

Now you know: Wall Street's found a polite way to call a stock "radioactive".

The big question now is whether any more Interpublic executives will contract fatal doses of radiation beyond the managers of Octagon Motor Sports and two poorly performing units of McCann-Erickson World Group, FutureBrand and Momentum, who already have been ousted.

"We have lost faith in the company's ability to manage operations in the short term," Mastin said, "and are concerned more systemic problems may exist." The ominous tone of those pronouncements must sound like the clicking of a Geiger counter to Sean Orr, the Interpublic CFO, and John Dooner Jr, the CEO.

Whether top management can be trusted has become Topic A in corporate America. And when you run a business whose practitioners are routinely derided as untrustworthy hucksters and snake-oil peddlers, there's little room to disappoint.

Looks as if Interpublic is running out of room.

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