REGIONAL FOCUS: Texas: Enron and on: Texas tries to reenergize

Old standbys offer hope for Lone Star State's future.

Old standbys offer hope for Lone Star State's future.

Many Texas PR practitioners feel like they've been ridden hard and put up wet in 2002, a year when the Lone Star State took early and sometimes dubious leads in prevalent business and PR trends. Houston's Enron spawned the corporate governance craze. American Airlines and in-state rivals Continental and Southwest bore the brunt of September 11's economic impact, along with others in their industry. Meanwhile, Austin and Dallas are singing the techno-blues with San Francisco and Boston. "Last year was terrible. This year is just bad," quips Mike Lake, Burson-Marsteller's Texas GM. At least the Texas PR market could fall back on old friends. Energy and politics might not be quite as inevitable as death and taxes, but they fuel industry, democracy, and the state's communications machinery even in bad times. The state of energy Enron's well-documented woes sent ripples through several industries and professions, including PR and IR, though some of the companies drenched worst by its wake swam in Enron's pond. Rival energy company Dynegy, which tried to buy Enron, now faces its own federal investigations and employee layoffs. Chief information officer Debbie Fiorito went to part-time consultant status just last month. Reliant, Halliburton, M.D. Anderson Cancer Center, and Celanese AG benefitted by hiring seasoned PR professionals from among the 20 or so let go by Enron, says Mark Palmer, managing director of corporate communications. He's among only five PR pros left in the department as Enron decides whether to rename itself and stay in business, or sell off its parts to the highest bidder. Enron's troubles illustrate the need for senior communicators on management committees, says Palmer, who didn't occupy such a seat until after the company went bankrupt and interim CEO Stephen Cooper took over. "There were very significant problems with Enron's balance sheet that having a corporate communications person at the right hand of God would not have fixed," Palmer notes. "Now, as a member of the management committee, I'm better informed and more able to provide contemporaneous advice. I have more of a personal stake in the outcome of the events." Palmer also advises PR pros against "setting up shop based on corporate governance or whatever the latest buzzword is." Those who focus too heavily on the PR trend Enron started may get burned as badly as Johnny-come-lately tech firms, he warns. Despite Enron, bright spots can be found in the diverse energy sector. Although California's woes damaged perceptions of electric deregulation, PR firms still got lots of work this year when Texas' market opened in January. Ketchum pitched Houston-based Reliant in Dallas, Porter Novelli helped recently troubled TXU in Houston and elsewhere, and Fleishman-Hillard assisted environmentally friendly Green Mountain Energy nationally. Meanwhile, Burson is entering the third year of a statewide campaign to educate consumers about electric competition. The four-year contract was originally estimated at $36 million, although the legislature must approve the final year's funding when it convenes in January. "We'd really like to see a fourth year," says Burson's Lake. "There have been some speed bumps along the way. People may have been a little less aggressive about switching." Lake still believes the deregulation trend will heat back up, with Texas as its leader. Houstonites try to convince outsiders that refineries don't define the cities, but they undoubtedly counted oil among their blessings this year. "Houston still, for better or worse, is relatively energy-dependent," admits Megan Mastal, Hill & Knowlton's senior managing director in Houston. "While that certainly has its ups and downs, it's been less cyclical." The recent ConocoPhillips merger brought employees, including communications/public affairs VP Sam Falcona, to Houston from Phillips' Oklahoma headquarters. And Shell Oil Products US hired Fleishman late last year to help replace Texaco's gas-station brand with its own. In May, Shell began rolling out an 18-month, market-by-market campaign that will ultimately put its brand on most of the 13,000 Texacos nationwide, says marcomm and external affairs manager Rick Wirth. Airlines battle the 'bankruptcy myth' Meanwhile, the media spotlight hasn't shone quite as brightly on Houston's Continental Airlines as Texas-based competitors American (which lost two planes on September 11 and another shortly after) and Southwest (the king of the low-fare hill, now facing challenges from price-cutters). Call volume has at least quadrupled for Southwest. "The airline industry shot up to a new normal after September 11," says Southwest PR director Linda Rutherford. Southwest's communications staff also spends more time correcting reporting errors since more journalists with less aviation experience now cover the beat. Yet economics prevented Texas' airlines from adding staff, and both American and Continental dropped a few communications positions last year. As a result, American depends more heavily on Weber Shandwick Worldwide for day-to-day assistance, says corporate communications VP Timothy Doke. All three airlines work to differentiate themselves from more financially troubled competitors, with Southwest touting its profitability and Continental its performance ratings. "We're trying to do whatever we can to dispel the bankruptcy myth," says Doke, referring to assumptions that when one airline files, others will follow. "We aren't managing the company this tightly to take it through the bankruptcy process." Tech continues to struggle As for technology, no one's painting a pretty picture. "There is just no argument that technology is very, very tough right now," admits Jodi Shelton, founder and CEO of Dallas' Shelton Group. The agency's revenue grew a little last year despite hard times in its semiconductor niche. PR21, the most recent national tech firm to defect from Texas, shut down its Austin office this spring. Execs of Dallas' Springbok Cohn & Wolfe declined interview requests, but in May, C&W chairman Stephen Aeillo acknowledged the firm then employed about 15 people in Texas, down from Springbok's peak of more than 80. Citigate Cunningham, which beat most competitors to Austin and grew to some 40 employees, has also shrunk to a dozen PR and research staffers there. "Spending levels obviously are never going to get back to where they were in the 1999-2000 time frame," laments Austin VP Deb McEvilly. Cunningham is pitching more than ever in Austin, mostly to software companies, McEvilly says. These days, businesses are more likely to buy programs that save money by making systems run more efficiently, she notes. Although Cunningham considered expanding beyond technology, it ultimately decided to stay the course, like Shelton Group. "That's what we do. That's who we are," says Shelton. "Diversifying outside of that might be a good temporary fix, but not a good strategic direction. We understand tech enough to know that tech will come back." "There have been so many people who have left Austin, I'm very optimistic that when people come out of their foxholes looking for PR, there are not going to be a lot of choices," says Phil Morabito, president of Houston-based Pierpont Communications. His agency's Austin outpost remains strong. Public affairs and other positives Pierpont's not the only PR firm in the state capital showing positive signs. A couple of newer arrivals are thriving, like the nearly two-year-old Waggener Edstrom office, which expects to end 2002 up nearly 50%. GCI Read-Poland grew by more than one-third last year, and won the highly contested Dell Computer pitch. President/CEO Jeff Hunt and his Texas staff also played key roles in reeling in Cap Gemini and RadioShack work for the parent firm. Hunt expects revenue to be flat or slightly up in 2002, however. "You don't win a client like Dell every year," he admits. Also faring well in Austin are agencies sticking with or returning to the city's public-affairs roots. Edelman and Burson recently stacked their Austin staffs with public-affairs veterans in preparation for the biennial legislative session. Even in Dallas, public-affairs guru Rob Allyn notes that clients' problems fueled a record year for his company. "When things are at their darkest for the economy and the PR industry overall, they are often at their brightest for public-affairs specialists," he explains. Overall in Texas, firms with consumer strengths, like Publicis Dialog, have weathered the recession relatively well so far. Publicis' Dallas office benefitted from last fall's purchase of Carter-Wallace by Church & Dwight. The agency long represented Trojan condoms and other Carter-Wallace brands, then picked up additional products from Church & Dwight, which owns Arm & Hammer. Vollmer's consumer pedigree also helped balance out its tech losses. The agency recently picked up the Marie Calender's frozen foods account, and is doing regional work for Whole Foods, says president Carolyn Mayo. Other trends include the tendency for big agencies to use their Texas resources on accounts based elsewhere, and for big client losses to be replaced by a broader array of smaller client wins. Budget consciousness creates opportunities for senior communicators who have become sole proprietors by choice or necessity. "There are only so many big fish in the ocean, but there are lots of little ones," summarizes Greg Artkop, Golin/Harris' former Dallas VP, who founded Lone Star PR in July. Texas PR execs aren't counting many chickens for 2003. On average, they estimate flat revenue comparing 2001 to 2002. And unlike last winter's rosy prognostications for a short recession, no one wants to jinx recovery by predicting when it might start. "At the beginning of the summer, I thought we were headed for an upturn," recalls John Wagner, SVP and PR GM for Bates Southwest in Houston. "I'm anticipating for 2003 that our goal will be to maintain our current client relationships and try to grow, but I don't think we're anticipating that there will be huge growth."

Firm Name                     Revenue (dollars)    Staff
Incepta (Citigate)                    5,086,614       27
Fleishman-Hillard                     3,477,000       19
TateAustin PR                         2,428,896       19
GCI Group/APCO Worldwide              2,230,490       28
Weber Shandwick Worldwide             1,627,000        9
Waggener Edstrom                      1,153,000       11
Pierpont Communications                 894,454       10
Vollmer                                 780,282        3
PR21                                    431,517        1
Fleishman-Hillard                    10,134,000       45
Springbok Cohn & Wolfe                6,661,000       30
Weber Shandwick Worldwide             6,656,269       32
Burson-Marsteller                     4,756,000       20
Publicis Dialog                       4,220,512       30
Edelman Public Relations Worldwide    3,892,632       22
Shelton Group                         3,603,226       36
Michael A. Burns & Associates         2,125,000       21
Ketchum                               1,890,000       15
Sunwest Communications                1,666,512       17
Vollmer                               1,647,067       11
Golin/Harris International            1,485,000       14
Cooksey Communications                1,071,766        9
The Powell Group                      1,005,717        9
Levenson Public Relations               746,256       15
TechCom Partners                        635,113        6
Ackermann PR                            449,890        3
Morgen-Walke Associates                 252,704        1
Hill & Knowlton                       4,489,000       25
Vollmer                               4,216,689       42
Pierpont Communications               2,988,050       22
Bates Churchill Public Relations      2,642,400       19
Weber Shandwick Worldwide             1,637,000        7
Fleishman-Hillard                     1,462,000        9
Golin/Harris International            1,215,000        8
Ward Creative Communications            928,995        9
Gibbs & Soell                           425,775        4
Dublin & Associates                   1,490,933       19
MS&L                                    588,000        5
Source: Council of PR Firms Auditing: No audit was required for
inclusion in the rankings. The CEO/CFO/principal was required to sign a
statement verifying the accuracy of the data and agreeing to possible
participation in a random audit Disclaimer: While every effort has been
made to ensure the accuracy of these figures, PRWeek cannot accept
liability for, nor make financial guarantees based upon, the
information in this chart.

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