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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)




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