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Agency.com Beats the Street's Lowered Estimates

Interactive shop Agency.com topped lowered Wall Street estimates for its fourth-quarter and 2000 performance, but gave darker guidance for the quarter ahead, as many of its peers have.

For the fourth quarter of 2000, the New York-based firm posted before-charges earnings of $2.7 million, or $0.06 per share, on revenues of $56 million. Wall Street had been expecting Agency.com to post a before-earnings profit of a nickel per share, according to Thompson Financial/First Call estimates.

While down from the $3.1 million earnings the company reported in third quarter, the positive results nevertheless boosted Agency.com's full-year performance above analysts' expectations as well. For 2000 overall, the company earned $8.6 million, or $0.19 per share, on revenue of $202.1 million. Analysts had predicted the firm would turn in a $0.17 per-share performance for the year, which also saw it top the $6.2 million loss Agency.com posted in 1999.

Those analyst predictions, however, were lowered in December, when Agency.com warned that revenue for the fourth quarter would be less than expected. The firm also cut 190 employees at the time.

Furthermore, the quarterly and year performance numbers are dampened by the sizable one-time costs incurred with severance pay and office closings associated with December's restructuring.

After taking charges of $12.9 million, the company posted a net quarterly loss of $9.1 million, or $0.25 per share for the quarter. That total is wider than fourth quarter of 1999, when the firm saw a net loss of $7.1 million. For the year, the company posted a net loss of $14.7 million, or $0.41 per share, on a pro forma level -- still less than its 1999 net loss of $27.1 million, however.

So, after lowered estimates, widening quarterly losses and sizable charges, Agency.com -- which has a history of trouncing analysts' expectations -- said it was proud of the firm's accomplishments, which nevertheless produced a better year overall than in 1999.

"We delivered strong results during a time of increasing uncertainty in our industry," said Agency.com chairman and chief executive Chan Suh. "While the demand environment remains challenging in the near-term, we believe we have positioned the company for long-term success due to the strength of our model and management team."

The company said it expected to post revenues between $40 million and $45 million for first quarter, with a cash loss of $0.08 to $0.15 per share. The expectations of a loss for 2001's first quarter aren't surprising: the quarter is widely expected to be the worst for advertising- and marketing-related companies like interactive agencies, with the market rallying sometime around midyear.

"We have a series of revenue initiatives underway, and will have better visibility on the rest of the year by the end of the current quarter," Suh said. "Our goal remains delivering long term revenue and earnings growth, but we are focused near term on generating additional revenue and managing cash effectively through this market transition."