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Grosses for the Bay Area’s top legal players sank faster than the last Madonna movie, but box office was boffo in 2002 when it came to firm profit margins. Take-home pay actually climbed as a percentage of gross revenue at eight of the 10 highest-grossing firms in the region, according to The Recorder‘s annual survey of firm finances. The profit-margin champ? Palo Alto’s Cooley Godward, where equity partners will net 34 percent of the firm’s $301 million gross. Though the firm’s laid-off associates may not be ecstatic with the news, the better margin actually helped Cooley increase its profits per equity partner despite a steep decline in gross revenue. Mark Pitchford, Cooley Godward’s chief operating officer, attributed the firm’s performance to a “relatively low level of bank debt, a relatively low amount of excess space, very efficient staffing ratios, tight controls in all areas of spending, and we have a core of experienced managers and supervisors who are all dedicated to achieving this type of result.” Close behind Cooley in the profit margin sweepstakes was litigation-heavy Heller Ehrman White & McAuliffe, where partners are taking home 32 percent of the firm’s $354 million gross. That’s a slight improvement on the 2001 number. In fact, gradual increases in profitability were the norm among the 10 highest-grossers, with most scoring margins between 28 and 34 percent. All, however, was not so rosy at Brobeck, Phleger & Harrison and Gray Cary Ware & Freidenrich. Brobeck experienced the steepest decline and recorded the lowest profit margin number among the 10 biggest firms. Partners are taking home 19 percent of $353 million from their 2002 gross. In 2001, the margin was 24 percent on income of $447 million. Palo Alto’s Gray Cary also stumbled, with a profit margin of 20 percent on a gross of $205 million. Last year’s margin was 23 percent. “The collection experience was softer than in the last two years,” said J. Terence O’Malley, Gray Cary’s chairman. “A number of clients were experiencing their own financial difficulties, and so we’ve found our receivables cycle lengthening and that’s had an impact.” And O’Malley isn’t predicting much better for this year. “The economy won’t be better [in 2003], and you have to budget against a flat economic environment.” Assistant Managing Editor David Brown, Senior Writer Renee Deger and Reporter Brenda Sandburg contributed to this story.

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