Phillips de Pury in Danger?

Andrew Goldstein of Portfolio writes a rather bleak piece on the number three international auction house, Phillips de Pury. Goldstein states the past year was very poor and 2009 is not starting out with much promise. Phillips has positioned itself as a hipper version of Christie's and Sotheby's, but the flash and aggressive presentation does not seem to be working.

Goldstein states The smallest of the three main auction houses—its sales are about a twentieth of either Christie's or Sotheby's—Phillips set itself apart during the boom years as a fast-moving salesroom for pieces by trendy contemporary artists like Ugo Rondinone and Anselm Reyle. It offered buyers a way to bypass gallery wait and wooed sellers by promising large minimum returns, known as guarantees. Simon de Pury, the house's Swiss-born chairman and auctioneer, also injected a dose of flash into the staid auction arena, and evenings at the house's Chelsea headquarters were packed with collectors in their thirties and forties sipping champagne and gossiping in a dozen languages.

Goldstein then continues with An atmosphere of "gallows humor," as one longtime buyer put it, has descended at Phillips. The already spare company has cut back its staff, and further cuts are expected under new CEO Bernd Runge, a former VP of Condé Nast International, who took up his post March 1. Even the lifeline extended to Phillips in October—the sale of a controlling interest to the Mercury Group last fall for a reported $60 million—acquired a pallor as conflicting rumors began circulating. Some in the art world speculated that the deal with Mercury, Russia's largest luxury conglomerate, wasn't an investment at all but rather a fire sale. Others wondered if Mercury would come through with the cash. "Nobody knew if it was for real," says Richard Feigan, a veteran New York art dealer. "There's no transparency." Now, only six months into the deal, Mercury's owners Leonid Friedland and Leonid Strunin are said to be suffering buyer's remorse as the Russian economy continues to deteriorate. The two men declined to comment and directed questions to Simon de Pury, chairman of the auction house. De Pury acknowledges that the firm is cutting costs and trying to create "maximum efficiencies," but says that Friedland and Strunin "are in no way discouraged by the general climate and are stimulated by the opportunities this offers."

To read the Portfolio article, click HERE. Hopefully Phillips will be able find a way through the economic issues and survive. The article does report some rather bleak sales figures for auctions in 2008. If the investment from the Russian Mercury group is in fact a legitimate investment and partnership, although it is questioned in Goldstein's article, perhaps the funds will allow Phillips to weather the economic storm.