Citigate Cunningham forced to reduce staff, salaries

PALO ALTO, CA: Citigate Cunningham has laid off 40 of its 210

employees, slashed the salaries of senior-level managers by 10% and

shuttered its fledgling Chicago office.



President and COO Joe Hamilton confirmed the layoffs and salary cuts,

and added that previously announced plans to open a New York office had

been shelved.



The cost-cutting moves were prompted by a restructuring that collapses

the agency's five business units - Brand Momentum, Momentum Research,

Fifth Gear, Cunningham Ventures and Cunningham Public Relations - into a

single company governed by three regional managers.



However, there appear to be other reasons for the cutbacks. Motorola has

moved the majority of its business to Hill & Knowlton, which won the

estimated $3 million to $5 million global PR account last

May.



The agency also lost significant revenue this fall when Hewlett-Packard

shifted most of its business to The Hoffman Agency. Furthermore, client

Pitney Bowes has reportedly pared its agency PR budget by more than

50%.



The agency is also under pressure to show some of the profits promised

by CEO Andy Cunningham last summer when details of the acquisition by

UK-based Incepta were announced.



Incepta paid $45 million up front and agreed to pay another

$30 million over the next three years if profitability goals were

met.



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