Omnicom agency BBDO Worldwide Thursday said it is in talks to establish only
what it would call a “strategic alliance” with San Francisco-based
interactive shop Organic.
The two companies disclosed few details of their proposed agreement,
although it involves a specific pact between Organic and BBDO’s own online
agency, @tmosphere. According to a statement by BBDO Worldwide’s chairman
and chief executive, Allen Rosenshine, the talks are aimed at creating
integrated digital marketing “solutions.”
“We have known and worked with Organic for several years and share
significant client relations,” Rosenshine said. “Digital media represents
an important means for enriching customer relationships and delivering
sophisticated marketing messages. We are hopeful that these discussions will
lead to the development of even more effectively integrated marketing
solutions for both existing and new clients.”
Spokespeople declined to say whether the talks were about merging Organic with
@tmosphere.
If the talks do center around a merger, then they’re not without precedent. BBDO’s parent company, Omnicom, is Organic’s second-largest shareholder, with a 17 percent stake in the firm (company insiders jointly represent the company’s largest shareholder). Additionally, BBDO and Organic have several large clients in common, including General Electric, Daimler-Chrysler and British Telecommunications.
In a separate statement, Organic chief executive Mark Kingdon gave little clue as to
the nature of the agreement talks with BBDO, though he did concede that his company is
looking at working closer with undisclosed parties.
“We are … actively expanding our marketing alliances with key partners
while we examine new strategic and financial relationships with several
companies which compliment our integrated service offering and further
enhance our skill sets and client network,” he said in the statement.
Like many in its sector, Organic has been hard hit by flagging revenues
as dot-com clients go under and traditional marketers cut their online
budgets. Thursday, the firm said it would restructure its organization to
better correspond with this reduced demand, cutting about 35 percent of its
staff, or 300.
As a result of the cuts, Organic said it expects to take a restructuring
charge of $17 million to $20 million during the first quarter.
“While our long-term outlook remains optimistic and our business
development reorganization efforts are gaining momentum, current market
conditions have dictated that we act decisively now,” Kingdon said. “By
eliminating overcapacity across our network to better meet the immediate
demands of the market, we anticipate realizing annual savings of
approximately $50 million through improved utilization and lower selling,
general and administrative expenses.”
Kingdon also hinted that the firm would consider future efforts to cut
overhead, though he did not specify exactly what those efforts might be.
“We believe these changes will provide a solid foundation upon which to
continue to build for the future,” he said.
While Organic maintains it has its long-term house in order, more
pressing issues are at hand. The company said it received a notice that
Nasdaq would be reviewing its listing on the stock exchange, unless it can
boost its minimum bid price to a dollar.
