Digitas Makes Its Numbers Despite Its Troubled Clients

Digitas’ total 2005 revenue totaled $565.5 million, a 32 percent increase over earnings the year prior, the company announced yesterday. The figures are in line with management expectations, which were lowered in late October when Delta Airlines, one of the company’s top clients through subsidiary Modem Media, entered into bankruptcy.

Earning per share totaled $0.12 in 2005, slightly above the lowered forecast, compared to the previous year’s $0.09 per share earnings.

For 2006, Digitas anticipates fee revenue of $380-$400 million and expects earnings per share to fall between $0.45 and $0.55 for the year.

On an after-the-bell conference call, Digitas Chairman and CEO David Kenny addressed analyst concerns over the woes of another major client, General Motors, which is currently awash in red ink. Kenny said GM accounted for 22 percent of the company’s revenue in 2005, and 20 percent in Q4.

“A good portion of the marketing is self-funding,” Kenny noted, “They sell the leads back to the dealers.” While he doesn’t expect the account to grow in 2006, Kenny did say, “We’re continuing to operate all of our programs [for GM].”

He seemed more optimistic about potential growth from newly-rebranded client AT&T, saying, “There’s a relationship to be built there over time.”

Earlier this month, Digitas agreed to acquire healthcare interactive marketing agency Medical Broadcasting Co. (MBC). That deal is expected to close this quarter, said the company. When asked if more acquisitions were planned for the near future, Kenny replied, “We’re not focused much on acquisitions. It’s not our strategy.”

He did indicate global expansion, beyond existing presences the company maintains in London and Germany, is a more long-term possibility, saying he hopes the company will begin to develop an international expansion strategy either late this year or in 2007.

Earlier this week, Digitas announced a stock repurchase program which authorizes the company to purchase up to $100 million in shares. At the same time, it announced Philip Hammarskjold resigned from the company’s board of directors, on which he’d served since 1999, representing then-majority shareholder Hellman & Friedman.

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