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May 21, 2010
Share ThisInterpublic Group of Companies, Inc. (IPG), the third-largest advertising company in the world continues to look for strategic investments that will help it to capitalize on emerging markets. In 2007, the company made investments in India and Brazil, further strengthening its presence in high-growth, developing markets.
In 2008, IPG built on this strategy and completed an important transaction that increased its stake in the Middle East Communication Networks (MCN). The company’s partner in Russia is the acknowledged advertising leader in that country. In China, the company operates with all of its global networks and across the full spectrum of marketing services.
However, the company depends on a few significant customers for a large proportion of its revenues, which could substantially affect its business. The company’s top ten clients accounted for almost 24% of total revenues in 2008 and 2009.
Interpublic Group is exposed to exchange rate fluctuations, as approximately 45% of its total revenue is generated from international operations. However, the company’s cost containment initiative should help it to thrive as demand for marketing services gradually picks up in a broader recovery.
During 2009, salaries and other related costs decreased 6.4% year over year. Office and general costs were more than 11% lower than last year. In the first quarter of 2010, the former declined 5.7% and the latter 2.4% year over year.
The company operates in a highly competitive market. However, we maintain our Neutral recommendation on the stock until a substantial market recovery.
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