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Internet Edition, August 1, 2001, Page 1


Interpublic plans to slash 3,500 jobs (in addition to the 2,200 it already cut this year) and will either close/merge more than 75 offices in a bid to counter the advertising/PR slump. It reported a $110 million second-quarter net loss following write-offs. The firm earned $117 million for the year-ago period.

Interpublic was hit hard by spending cutbacks by financial services, telecom and technology clients, Sean Orr, CFO, said during a July 26 conference call. He conceded that Interpublic was hurt by its "failure to take costs out of its business."

Interpublic will take a $500 million charge to cover its restructuring. That includes charges for integrating its True North acquisition (IPG has closed TN Chicago headquarters), and $40 million for merging BSMG Worldwide into Weber Shandwick Worldwide.

Orr said Interpublic would be more selective on the acquisition front. He said the firm made 11 transactions worth about $60 million this year. That compares to 65 deals a year worth an average $750 million made during the past five years.

Interpublic stock sunk to its 52-week low of $25.90 on the news.


Omnicom reported a 19 percent rise in second-quarter net to $151.4 million. Pre-tax income rose 14 percent to $271.7 million. Revenues jumped 15 percent to $1.8 billion. Its stock surged more than $4 a share on the news.

CEO John Wren told investors that Omnicom's full-year earnings will be in the $2.80 a-share range, which is the consensus of Wall Street.

The company, despite the lackluster ad market, expects to win an additional $1 billion in net business gains during the current quarter.


David Frail, who is executive director-financial & strategic communications at Verizon, joins General Electric next month.
As GE's manager-financial communications, Frail will report to Beth Comstock, senior VP-corporate communications.

Heyman Assocs. conducted the search. Bill Heyman said the "job market is at its slowest point in over 12 years." The market began collapsing in December, but is beginning to perk up, he added.


Charles Holleran, who joined Coca-Cola in June 2000 as chief communications officer, is leaving his post after having completed his assignment of restructuring the North American PR staffs of the company, a spokesperson said.

Holleran, 56, was previously managing director of global communications, PricewaterhouseCoopers, New York. He joined Atlanta-based Coke with the assignment of putting together basic corporate communications strategy, said the spokesperson.

He had continued to live in New York City.

William Marks continues as VP-PR of Coke. He was formerly head of the Atlanta office of GCI Group and then headed its North American telecommunications practice.

Coke's stock is around $44, close to its 52-week low of $42.


Edelman PR Worldwide is re-introducing Vespa motorscooters to the U.S. after a 15-year hiatus. The firm is pitching Vespa and its accompanying sportswear line as symbols of Italian style.

The sleek and compact Vespa was designed in Italy in 1946, and became popular here following the release of the movie, "Roman Holiday" in 1953.

Italy's Piaggio, which has sold more than 16 million Vespas, had to exit the U.S. during the 1980s because the motorscooter failed to meet Environmental Protection Agency emission standards.

Piaggio USA opened its first boutique in Sherman Oaks, Calif., last November, and plans more throughout the country.
Edelman's Martin Pearce in New York handles the Vespa account.

Pharmaceutical Research and Manufacturers of America is spending $5 million at Ketchum to pitch Congress its concern about patent protection and intellectual property rights, according to the National Journal. Ketchum also is promoting the drug industry's charitable efforts, and its role in developing medicines to fight diseases such as malaria and AIDS... Cynthia Hudson, who chaired Burson-Marsteller's PA practice, has set up her own PR shop in Alexandria, Va. The National Assn. of Chain Drug Stores is a charter client. Before B-M, Hudson was at Robinson Lerer Sawyer Miller, and worked on the Presidential campaign of Mike Dukakis.

Internet Edition, August 1, 2001, Page 2


Philip Morris has apologized for a company-funded report calling cost savings from smokers' early demise one of the "positive effects" of cigaret consumption.

The company posted a message on its website saying it "made a terrible judgment as well as a complete and unacceptable disregard of basic human values."

The Czech Republic last month distributed an economic analysis concluding that cigarets are not a drain on the country's budget, in part because the government saves money on healthcare, pensions and housing when smokers die prematurely.

The study, which was commissioned by Philip Morris and produced by consulting firm Arthur D. Little International, weighs the cost of tobacco use, such as medical care for sick smokers, against benefits, including revenue from excise taxes on cigarets. The study found in 1999 the Czech government had a net gain of $147.1 million due to smoking.

The study's conclusions have been the subject of negative commentary. "Tobacco companies used to deny that cigarets killed people. Now they brag about it," syndicated columnist Ellen Goodman wrote. On ABC's "Politically Incorrect," host Bill Maher called Philip Morris "industrial scum."

The American Legacy Foundation, a Washington, D.C., antismoking group, placed ads in major newspapers across the country that reference the report.

The ad shows the foot and leg of a cadaver in a morgue. A toe tag reads: $1,227. That's how much a study by Philip Morris said the Czech Republic saves on healthcare, pensions and housing every time a smoker dies."

Philip Morris has canceled plans for similar studies in Poland, Slovakia, Hungary, and Slovenia.

The report, which was done in anticipation of a debate over excise tax increases on cigarets in the Czech Republic, was prepared without the knowledge of officials at Philip Morris' New York headquarters, according to Steven Parrish, who is senior VP/corporate affairs at Philip Morris Cos.


The National Aeronautics and Space Administration plans to issue an RFP for "customer and employee relations" on Aug. 8. Proposals will be due the following month.

The RFP covers employee and organizational development, internal communications, government and community relations, educational programs and media relations.

It will be a one-year cost-plus-incentive fee contract with four one-year options.

The work is to be done at NASA's George C. Marshall Space Flight Center in Alabama.

Carol Greenwood is the contract specialist. She can be reached at 256/544-2718.


The Securities and Exchange Commission has settled its lawsuit against Mark Jakob, the man accused of issuing a fake press release through Internet Wire last August.

Jakob, 23, has agreed to turn over the $241,000 he made trading Emulex stock, plus $97,000, plus interest. He will also pay a penalty of $102,642. The total represents the amount of money frozen by the government after Jakob's arrest in August 2000.

That money will be held by the court and paid to defrauded investors who have filed a class action suit. The SEC believes Jakob's actions defrauded investors out of $110 million.

Last December, Jakob pleaded guilty to wire and securities fraud. He is scheduled to be sentenced Aug. 6.

Jakob sold 3,000 shares of Emulex stock short. A short sale involved selling borrowed shares of a stock in anticipation that the price will decline. But instead the shares rose in value.

A few days later, facing a potential loss of $97,000, Jakob allegedly wrote a phony press release stating that the chief executive of Emulex had quit and the company was restating its quarterly earnings from a profit to a loss.

Jakob was able to send the release through Internet Wire. He had worked for IW for more than a year and had left on good terms the previous week.

Within minutes of the release becoming public, Emulex's share price dropped until trading was halted on the Nasdaq. Jacob covered his short position and bought additional shares which he later sold at a profit. Emulex's stock recovered most of its value by the end of the day.


Weber Shandwick Worldwide has established an African practice to help that continent raise the $25 billion it needs from private sources during the next decade to bolster the economies of its 53 nations, Marcus Courage told this newsletter.

Courage, WSW's head of international government relations, believes the stars are in alignment to boost Africa from the abyss of disease, corruption, warfare and natural disasters.

The recently minted New African Initiative, for instance, commits the continent's leaders to "mobilize the private sector," noted Courage.

Africa's leaders also committed themselves to improving healthcare conditions, and mediating the seemingly never-ending armed conflicts among them.

There also is a commitment among NGOs to reduce Africa's poverty rate by half by 2015, said Courage.

"Poverty is described as living on less than a dollar a day," he said.

WSW will coordinate its African operations through "hub" offices in Morocco, Kenya, South Africa, Uganda and Cote d'Ivoire.

Internet Edition, August 1, 2001, Page 3


Sixty-four percent of readers use the Sunday newspaper as a source of information about new products and services, according to the findings of the second annual Sunday in America study from Parade.

The study, which was conducted by Yankelovich in conjunction with Harris Interactive, found readers are in a "Sunday state of mind."

This attitude provides PR professionals with an opportunity to reach consumers on the one day when they are most likely to think about planning, researching and buying products, and are more actively seeking such information.

Researchers said readers are relaxed and more receptive to new messages on Sundays, and actively look to newspapers for the information they seek.

Americans also use the Sunday newspaper to make financial decisions; to think about major purchases, like cars and vacations, and to check out what's on sale at local stores.

They often use the Sunday paper for ideas on plays/movies to see (78%); food/recipe ideas (63%); things to do with the family that day (63%); buying computers and household appliances (60%); fashion/accessories (59%); cars (55%); medical/health concerns (54%), and vacation plans (50%).

During the last three months, based on information from the paper, 70% made entertainment choices, and 64% purchased something at a store.


Rem Koolhass, a Dutch architect and former journalist, has been hired by Conde Nast as an editorial marketing consultant.

Angela Arambulo, previously fashion editor, was promoted to fashion director of Vibe magazine.

James Meigs was named deputy editor/features of National Geographic Adventure, in New York. Meigs was formerly editor-in-chief of Premiere.

Samantha Marshall, previously a reporter for The Asian Wall Street Journal, has joined Crain's New York Business as a reporter covering healthcare, with a focus on business and consumer issues.

Deborah Millan is filling in for Kathleen Deveny, assistant managing editor, who oversees the "Business" and "Society" section at Newsweek, until Deveny returns on Dec. 3 from a leave of absence.

Jeff Pruzan, previously assistant editor of the "People" section of Financial Times, was named news editor, U.S. markets, replacing Mary Chung, now the paper's U.S. equities correspondent.

Gerald Boyd will become managing editor of The New York Times in September.

Michael Hirschorn, editor-in-chief of Inside. com, is joining VH1 as senior VP of news.

Jeffrey Rothfeder has resigned as editor of PC Magazine.

Perry van der Meer, previously deputy editorial director of Talk, to Harper's Bazaar as managing editor.

John House has resigned as managing editor of Yahoo! Internet Life. His spouse, Cyndi Stivers, is editor-in-chief of Time Out New York.

David Sreitfeld, former reporter for The Washington Post, has joined The Los Angeles Times as a reporter covering technology.

David Bohrman is rejoining CNN as senior executive producer of the network's new evening newscast anchored by Aaron Brown. Bohrman had worked with Brown at ABC News, where they created "World News Now" 10 years ago.

After leaving CNNfn in Aug. 1999, Bohrman started, a streaming entertainment site, which filed for bankruptcy in Oct. 2000.


The new TV reality programs have made "product integration" deals a hot PR tool.

While product placement used to be a TV taboo, "the rise of reality TV has brought a marketing tactic not seen much on the small screen since the 1950s," says USA Today's Michael McCarthy.

He said Miller Brewing and Sears, Roebuck are negotiating deals with "Temptation Island 2" and "The Runner," and Chrysler is looking for placements for its line of autos.

Contestants on CBS' "Survivor" used several products on the show, including the new Pontiac Azteck SUV, which was awarded to the winning contestant. Buick placed its new Rendezvous SUV on the first episode of CBS' "Big Brother 2."

"Murder in Small Town X," Fox TV, will feature placements by Taco Bell, Jeep and Nokia.

MEDIA BRIEFS__________________

Newsweek will start its fifth non-English language edition, Newsweek Polska, this fall. The new Polish-language edition will be published in collaboration with Axel Springer Polska.

Tomasz Wroblewski is editor of the magazine, which will have its own staff.

Essence beauty editor Mikki Taylor wonders why black models are scarce on the catwalks as she takes a controversial look at fashion's failure of imagination in the magazine's August issue.

The dearth of models of color is even more shocking when you consider that black women spend an estimated $9.5 billion a year on fashion and accessories and another $3.1 billion on shoes, said the article.

(Media news continued on next page)

Internet Edition, August 1, 2001, Page 4


In a special report on "Buzz Marketing," Business Week said companies are "taking to the streets, as well as cafes, nightclubs, and the Internet, in record numbers to seek out the trendsetters in each community and subtly push them into talking up their brand to their friends and admirers."

By orchestrating a tsunami of chatter, marketers are hoping to replicate the pattern set by such overnight sensations as the independent film "The Blair Witch Project," the Harry Potter book series, and Razo kick scooters, said BW, which noted that in each case, "buzz that seemed to come from out of nowhere transformed what otherwise would have been a niche product into a mass phenomenon."

Word-of-mouth has grown far more sophisticated since the early days of simple publicity stunts, according to BW. "Marketers are learning to turn their brands into carefully guarded secrets that are revealed to a knowing few in each community, who in turn tell a few more, who tell a few more, and so on."

BW said Ford Motor recruited a handful of trendsetters in a few markets and gave them each a Focus to drive for six months rather than blitzing the airwave with TV commercials for its new subcompact.

Their duties were to be seen with the car and hand out Focus-themed trinkets to anyone who expressed interest in the car.

Other buzz marketers cited as examples by BW are Lucky Strike, which offered free coffee, cell phone calls, beach chairs and other comforts to ostracized smokers outside office buildings; Lee Dungarees, which sent out faux homemade videos by e-mail to 200,000 trendsetting consumers; Chrysler, which planted early models of the PT Cruiser in rental fleets in trendy Miami, and Piaggio USA, which hired sleek-looking models to ride Vespa Scooters in Los Angeles.

No PR firms are mentioned in the report as handling buzz marketing campaigns.


Jay Jaramillo, news assignment editor, KABC-TV, Los Angeles, said visuals are an important element for getting a story on TV.

Jaramillo said TV editors are concerned with visual aspects of a pitch. "When you pitch us a story, one of the first questions we ask is `What are we going to see,'" he said.

"If you're pitching someone to us, and all we're going to see is a talking head, and he's not going to show us what products or services he has or what he's making, then it is boring. We need something the viewers can look at and say 'Wow, look at him do that.'"

Jaramillo joined Nickie Bonner, who is a field producer in CNN's West Coast bureau, on a panel at a workshop that was held at the Century City offices of Burson-Marsteller, which sponsored the event with On the Scene Productions and PRSA/Los Angeles.

Jaramillo said publicists should fax him story ideas before they pitch a story. He said KABC mainly covers local news.

Bonner looks for economic trends on the West Coast and accepts story pitches. "I don't mind PR people and I'm happy to take your pitch," said Bonner, who is not interested in product pitches.

"I'm always looking for interesting people who have a high profile or a good track record in their industry," said Bonner, who prefers e-mail pitches. She can be reached at [email protected].


A New York-based publicist has been told by an editor for The New York Times that the paper will not cover same sex civil union announcements on the wedding pages.

Joseph Quenqua, the VP of mPRm PR, and his partner, Art Smith, plan to make their relationship legal with a civil union ceremony to be held Aug. 30 in Vermont.

William Borders, a news editor, told Quenqua that "We have given careful thought to the question, especially in light of our editorial page's long and unequivocal support of same sex unions and the Vermont measure in particular.

"Nevertheless, the editors have concluded that the civil unions in Vermont fall short of equivalency to marriage in significant respects, and our wedding pages are still confined to marriages.

"We don't feel able to open those pages to civil unions in part because that would amount to taking an editorial position in the news columns on an issue that still very much divides society."


The Toronto Star has stopped publishing its weekly technology section, "Fast Forward."

The section, which was started in April 1994, is a victim of the "dot-com collapse," said Robert Wright, a writer for the section.

The Star was one of the first daily newspapers to publish a free-standing tech section.


Family PC's September issue will be its last.

Ziff Davis Media has decided to pull the plug instead of repositioning the tech monthly this fall as Family Internet Life, a brand extension of Yahoo! Internet Life.

Twenty-five employees lost their jobs. Robin Raskin, who was the magazine's editor-in-chief, will be offered another position within the company.

Ad pages fell 34% through June to 263, according to the Mediaweek Magazine Monitor.

Internet Edition, August 1, 2001, Page 7


Incepta Group's Citigate Communications has acquired the Chicago-based firm MSI Strategic Communications and merged the practice with Citigate's Chicago office.

Ron Kelly, managing director for Citigate, and Susan Silk, MSI's founder and president, will head the combined unit. Silk adds the title of senior director at Citigate.

Kelly said he has known Silk professionally for 30 years, and that MSI's social and public policy specialties add a new client base to Citigate's practice.

Silk will handle clients through the firm's outreach, creative and training centers, which cover services from IR, PR and PA, to media training, advertising and annual report design.


Stephen Smith, who recently left the editor post at U.S. News & World Report<D>, has joined Publicis Groupe's Winner & Assocs. as executive VP. He will head the Washington, D.C., office of Los Angeles-based W&A.

Smith told this NL W&A was not the "typical PR firm churning out press releases in the hopes of generating a favorable story or two."

Smith said W&A's aim to foster a "deeper awareness of issues" appealed to him.

He previously edited the National Journal and was a founding editor of Civilization magazine.


The Harvard Medical School Center has tapped Neale-May & Partners to raise the national awareness of its "S.O.S.-Save Our Students" program aimed at countering violence in schools.

The agency is currently seeking an exclusive corporate sponsor for the program that will be targeted at middle and high schools with a complete communications program, which features actor Matt Damon.

The multi-media curriculum being developed by the Harvard-affiliated Center for Mental Health and Media will be offered cost-free via the Internet and distributed to middle and high school students, staff and parents as an essential tool to break the cycle of school violence.

Companies interested in sponsoring the program are invited to contact Lisa Levy at Neale-May/New York (212/213-5400 ext. 221).

The PR program will showcase the involvement of the corporate sponsor, raise awareness of the issue's scope and severity and position the curriculum as a viable weapon in the battle to keep peace in U.S. schools, the agency said.

The program was set up in response to a recent study conducted by the CMH&M that found violence prevention is the number one student health concern among teachers and administrators.

A 1999 Gallup poll found nearly half of parents surveyed feared for their children's safety at school, while a Children's Defense Fund/Newsweek study found fear of violence as the top concern of the majority of children aged 10 to 17.


Tourism Tasmania has named Development Counsellors International, New York, as its PR agency.

At a July 27 meeting in New York, Premier Jim Bacon said North America was Tasmania's single biggest market for international visitors.

"Tourism Tasmania has worked hard to develop the North American market, particularly through the Australian Tourist Commission's `Visiting Journalist Program' and by establishing strong relationships with the travel industry," he said.

Bacon said the appointment of a PR agency is the next step in maintaining the profile of Tasmania as a "must see" destination for North Americans.

Bacon said DCI, which specializes in tourism and economic development marketing, was well suited to Tasmania's requirements.

Last year more than 20,000 holiday visitors from North America visited Tasmania, a 25% increase in the previous 12 months.

More than 100 media and trade representatives went to the state over the same period, generating nearly $2 million worth of coverage.

DCI will work with Tourism Tasmania's regional manager North America and the Australian Tourist Commission to generate media visits.


Coretta Scott King will discuss how effective advocacy can spur positive social change during PRSA's annual conference set for The Atlanta Marriott Marquis Hotel.

Ambassador Andrew Young and MIT economics professor Lester Thurow are other keynoters at the Oct. 27-30 conference. Bill Novelli, who was recently named executive director at AARP, will serve on a panel dealing with new ways to communicate with changing publics.

This year's conference format has been revamped, according to PRSA. There will be pre-conference professional workshops on Saturday, and an earlier start time on Sunday.
PRSA, due to "popular demand" has resumed its "Breakfast Roundtables" and "The Exhibition Hall," which will feature displays and presentations from more than 50 vendors.

There will be an opening night gala at the CNN Center. It will offer PR pros a behind-the-scenes tour of the network's news operations.

PRSA plans four "Hit Us With Your Best Shot" interactive sessions. They will deal with internal communications; crisis communications and media relations; people and careers, and independent practi-tioners.

Registrations are accepted at The deadline for early bird registration (saves $100) is Sept. 7.

Internet Edition, August 1, 2001, Page 8



Interpublic, the great acquisition machine, is changing its ways, according to Sean Orr, CFO of the world's No. 1 ad/PR combine. That's what Orr told analysts during the July 26 conference call announcing plans to take a $500 million charge to cover its restructuring. Orr noted that IPG averaged 60 deals a year worth $750 million during the past five years. So far, IPG spent a mere $60 million for acquisitions this year. Orr said IPG will place a greater emphasis on organic growth when evaluating the performance of management. An analyst, during the Q&A period, asked whether IPG's lackluster performance ($110 million second-quarter loss due to write-offs) was due to its past acqusition spree. That's just not the case, replied IPG.

Largest layoffs in ad history? Advertising Age, in its July 30 cover story, reported "the world's largest ad agency holding company is making what appears to be the biggest full-year agency layoffs in history." The AA story carried "The Dooner Party" headline, a reference to the Donner Party band of pioneers who had to resort to cannibalism to survive its trek west. IPG announced plans to cut 3,500 staffers, on top of the 2,200 it already dropped during the first six months. Most of the remaining cuts, according to AA, are expected to come from Weber Shandwick Worldwide. Orr said half of IPG's $80 million realignment charge will be for the integration of BSMG Worldwide into WSW. On July 10, IPG CEO John Dooner announced the merger of BSMG into WSW to form the largest global PR firm with more than $500 million in fee income. Said Dooner: "There is incredible geographic, practice area and client synergy between these two firms. By bringing them together, we can now offer our clients the highest quality counsel on how to harness the power influence to shape public opinion and manage their various constituencies."

Hats off to Omnicom. During the Q&A, Dooner complimented the performance of archrival Omnicom. When asked why IPG has such a gloomy outlook, while Omnicom expects to reach its goal of winning $1 billion in net new business for the third-quarter, Dooner said sometimes you have to salute the competition. He added that if Omnicom's forecast is correct, IPG also will benefit. Omnicom posted a 19 percent rise in second-quarter net to $151 million.

Philip Morris does the wrong thing. Philip Morris does the right thing. Philip Morris owned up to making a major mistake when its overseas unit financed a consultant report showing how much money the Czech Republic saves from the early death of smokers. PM minced no words with the apology posted on its website. Philip Morris International "showed terrible judgment, as well as a complete and unacceptable disregard of basic human values," read the statement. The company "understands the outrage that has been expressed and we sincerely regret this extraordinary unfortunate incident." PM says no one benefits from the very real, serious and significant diseases caused by smoking.

All's quiet on the IBM front. Ed Barbini, IBM's VP-corporate PR, says IBM is proceeding nicely on its plan to complete the consolidation of its $40 million PR budget at a maximum of three shops by September. IBM uses about 50 agencies. Omnicom's Brodeur Worldwide, Interpublic's TSI Communications and Bcom3's Manning, Selvage & Lee are its biggest PR firms. Barbini is assisted by New York-based consultant Osgood, O'Donnell & Walsh.

Ralph Nader's Public Citizen issued a blow to one of the "sacred cows" used by the Pharmaceutical Research and Manufacturers of America. That is the $500 million average cost used to develop a new medicine. PC claims the outlay for a new drug is in the $110 million range. It credits Phrma for making the $500 million figure "ubiquitous and widely accepted, though unfortunately it is misleading and inaccurate at worst." Phrma defended the $500 million target as "one that has been widely accepted by economists, scholars and government for more than a decade," according to Christopher Molineaux, Phrma's VP-PA. The group, in fact, believes it may be guilty of lowballing the drug development figure. It cited reports by Lehman Healthcare and Boston Consulting Group. The Lehman study said drugs beginning in development in 1995 will cost an average of $675 million before they hit the market. BCG says drugs that went into development this year will wind up costing $590 million to $880 million. The Nader group also attacked the use of legions of lobbyists by the drug industry to make its case in Washington. The industry spent $92 million in lobbying in 2000, which was up 8.5 percent from the earlier year. The drug industry used 625 lobbyists, "or more than one lobbyist for every member of Congress to coax, cajole and coerce lawmakers," sniffed PC. Liberal Democrats Tom Allen (Maine) and Pete Stark (California) used the PC report as evidence why seniors don't have a Medicare prescription drug benefit. "They spend astronomical funds on lobbying and marketing to put politicians in their back pocket while their profits continue to rise," said Stark. The drug industry, of course, has every right to plead its case via lobbyists, PA or PR officials. Nader, and his offshoots, are masters of making their case via skillful use of the media. Advocacy is the drug industry's tool to blunt attacks by Nader.
-- Kevin McCauley


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