MSGi Axes Staff, Ousts Execs, Closes Internet Subsidiary

Integrated marketing firm Marketing Services Group, Inc. told investors at its annual shareholders meeting Friday that it aims to shave more than $5 million in annual costs through a broad restructuring effort.

Although details are sketchy, cuts appear serious and wide-ranging at the New York-based firm, which provides traditional direct marketing and interactive agency services to companies including American Express, General Electric, Verizon and Walt Disney.

Several of the company’s executives will find themselves jobless, and most of the firm’s New York operations will be closed, consolidated or relocated.

“Renewing the direct marketing focus of the company, combined with an aggressive program to strengthen internal resources, has necessitated the elimination of several executive positions due to materially reduced demands put upon these individuals,” said the company in a statement.

The firm’s president, Stephen Killeen, will step down, as will Bob Kielhorn, the firm’s vice president of marketing planning. Additionally, chief strategy officer Mark Clemente’s contract is being allowed to expire without renewal.

Jeremy Barbera, chief executive and chairman will assume the position of president.

Personnel across the board would also be “consolidated,” although the company did not disclose numbers, or from which units the cuts would come.

MSGi also said it would close its New York-based Pegasus Internet unit. MSGi will, however, continue providing online products and services through the various direct marketing divisions under its flagship firm, MSG Direct. But it didn’t disclose whether it would continue all of Pegasus’ myriad services — which ranged from e-commerce technology to repping Web publishers.

MSGi also said it would move its list management and brokering operational and technology infrastructure out of New York and to its lower-cost Philadelphia-area facilities.

In a statement Friday, MSGi put a good face on the news, saying that the reorganization comes as part of its ongoing program to integrate the direct marketing firms it has acquired during the past three years.

“MSGi has been focusing on streamlining our operations to attain maximum profitability and shareholder value,” Barbera said in the statement. “This phase of the initiative is the largest step we’ve taken to realize the sizable cost-reduction synergies.”

“The reorganization will also support MSGi’s rapidly expanding business development efforts,” Barbera added. “The changes we are effecting will further enhance our national cross-selling activities and create stronger systems to augment our client-service and development efforts.”

The reorganization does not affect some units of the firm, including direct mail agency Grizzard Communications Group, and data analytics and direct mail processing company TABS Direct. However, MSGi wouldn’t rule out future cost-reduction efforts in those areas as well.

The news isn’t unexpected, and continues an effort to distance itself from the troubled Internet marketing space; in September, the company shut down its WiredEmpire subsidiary, which licensed email marketing tools. Executives said at the time that closing WiredEmpire, which eliminated 53 jobs, increased MSGi’s focus on its core direct marketing business and would expedite the company’s path to profitability — though it would still perform a reduced set of online marketing functions.

In January, the firm retained Goldman Sachs to “explore possible strategic alternatives” to maximize shareholder value — including an investment in the company by a strategic partner or an outright sale of the company.

Shares of MSGI were down 6.25 percent at press time, trading at $1.90.

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