Organic Loses Execs, Tightens Belt for Long Haul
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Executives at San Francisco-based interactive agency Organic said Wednesday that efforts at deep cost-cutting are at last having their intended effect.
As a result, while quarterly revenues decreased 4 percent to $13.8 million, Organic saw a pro forma net loss of $8.7 million -- 60 percent below last quarter.
Now, the company is expecting that it will reach breakeven in fourth quarter if it only brings in $12.5 million in revenue -- projections that are down significantly from the $40.3 million that Organic anticipated last year.
But Tuesday's developments aren't all rosy for the company. Wall Street had anticipated a loss of $0.02 per share, or $1.74 million, according to Thomson Financial/First Call. Instead, the company turned in a loss of $0.10 per share.
Organic president Michael Hudes and chief financial officer Sue Field, who also holds the title of executive vice president, have resigned to pursue other opportunities, according to the company. Hudes had been at the company since 1995, Field since 1999.
Additionally, the company said it would eliminate about 80 positions this month, roughly half of which are billable.
"Despite eliminating approximately $130 million of expense and capital spending over the past seven months, we will continue to examine our cost structure in order to reach profitability," said chief executive Mark Kingdon.
Those cuts, and other, "newly identified expense items" will help the company save nearly $10 million annually, Field said. Following the latest round of staff reductions, Field said Organic would have about 506 employees -- less than half of the number it did at its height last autumn.
While the immediate outlook for interactive agencies like Organic is gloomy, the firm's extensive cost-cutting, and its new predictions of turning the corner and breaking even in fourth quarter, suggest it's capable of remaining independent.
Rumors have circulated for months about it being appended onto a larger company: first onto BBDO Worldwide -- an agency owned by former Organic investor Omnicom -- and later, into Omnicom joint venture Seneca Investments. (Last month, Seneca announced its intention to take a controlling interest in fellow i-shop Agency.com. The venture firm also owns Omnicom's stake in competitor Razorfish, as well as Organic.)
Nevertheless, last month also saw several of the company's executives spin their shares of Organic into a holding company, Cinagro, designed to aggregate their ownership and make it more appealing to a buyer. Those executives included Hudes and chairman Jonathan Nelson.
Company spokespeople declined to comment on the matter.