UPDATE 3-Omnicom profit down 14 pct, but beats forecasts
* Q4 EPS 88 cents vs estimates 82 cents
* Q4 rev $3.37 bln vs estimates $3.36 bln
* Organic rev down 2.3 pct
* Shares flat at midday after 2.5 percent morning rise
By Paul Thomasch
NEW YORK, Feb 10 (Reuters) - Omnicom Group Inc (OMC.N) reported a 14 percent drop in quarterly earnings as advertising spending slumped badly at the end of the year, but its profit and revenue showed more resilience to budget cutbacks than Wall Street had expected.
Executives from the world's largest advertising company described the fourth quarter as the toughest stretch since 1992, when the advertising industry suffered a long, difficult slump. The current downturn, they said, will likely last through the next several quarters at least.
"As everyone knows, the pace of economic change in the fourth quarter was fairly unprecedented. Almost all of our agencies experienced some loss of revenue," said Chief Financial Officer Randall Weisenburger, referring to a roster of some of the biggest agency names in advertising, including BBDO Worldwide and DDB Worldwide.
Still, shares of Omnicom gained initially on Tuesday after the company reported that fourth-quarter income fell to $271 million, or 88 cents a share, which surpassed the average analyst forecast of 82 cents, according to Reuters Estimates. A year ago, it posted income of $313.9 million, or 96 cents a share.
One drag on results was the disappearance of spending on special projects -- advertising work that usually comes near the end of the year when clients use up excess budget on one-time events.
Analysts have said that sort of spending can often account for $200 million in extra revenue in the fourth quarter for Omnicom.
"In the fourth quarter of each year, there is a couple hundred million dollars of -- I'll say project revenue -- that comes in," Weisenburger said on a conference call.
"Those projects tend to come up because people have budgets left to spend. As we suspected, that didn't come in, or at least a percentage of that didn't come in," he said.
Omnicom's quarterly revenue fell 7 percent and, in a very rare occurrence, it reported a 2.3 percent drop in organic revenue, a closely watched industry benchmark that excludes foreign currency impact and recent acquisitions.
Omnicom's client list includes such corporate titans as Anheuser-Busch Cos Inc INTB.BR and McDonald's Corp (MCD.N), as well as the troubled automaker Chrysler. Concerns that major clients, especially Chrysler, would scale back spending caused Omnicom to move ahead with dramatic cost-cutting plans late last year, including eliminating jobs and slashing bonuses.
Indeed, across its agencies, Omnicom cut between 2,800 and 3,500 positions out of a total of about 70,000, sources have said.
Weisenburger said annual savings from the cost cutting would equal about $215 million. "As we move through 2009, we will continue as and if necessary to aggressively manage our costs to keep them in line with revenue forecasts," he said.
Shares of Omnicom, down about 38 percent in the last year, were unchanged at $28.11 near midday on the New York Stock Exchange, after rising as much as 2.5 percent earlier in the day. (Reporting by Paul Thomasch; Editing by Derek Caney and Matthew Lewis)