Modem Media Share Price Spikes

NEW YORK–Investors snapped up shares of Modem Media Inc. for a fourth consecutive trading session Thursday, which the online ad agency attributed to its comforting message that it wants to remain independent.

Some of Modem Media’s rivals have been acquired for bargain prices, but last Thursday’s Wall Street Journal reported that Modem Media has set out to block suitors from buying it on the cheap.

“The [trading] volume has picked up since Friday,” said Chief Financial Officer Frank Connolly. Since Friday, the stock has risen 55%.

Though the stock has nearly tripled in value since its 52-week low in March, it is still far below its 52-week high of $18.88 reached last July.

Mr. Connolly said the current stock price, affected by the overall selloff in the Internet consulting services sector, “doesn’t reflect the fair value of our businesses.”

“We’re focused on improving profitability to ensure we’re one of the few remaining independent interactive marketing firms,” he said, noting that Modem Media has about $33 million in cash, zero debt and a big-name client list including General Motors Corp. and Delta Airlines Inc.

The company, slated to report second-quarter earnings on July 31, has said it expects the quarterly revenue to be below its first-quarter and year-earlier levels.

Its second-quarter profits will be “flat or slightly higher versus the first-quarter” results, Mr. Connolly said.

Modem Media earned four cents a share during the first quarter, and Wall Street is looking for three cents a share for the second quarter.

Shares of Modem Media were up 63 cents, or 11%, to $6.32 at 4 p.m. EDT on the Nasdaq National Market.

Dubbing Modem Media a “premier survivor” from the washout in the online ad industry, Buzz Zaino, a portfolio manager with Royce & Associates, Inc., dismissed the speculation that the company will undergo the same fate as its acquired rivals.

“This is a very fine company,” Mr. Zaino said, citing its healthy balance sheet and positive cash flow.

The company, which helps businesses set up and maintain online-commerce Web sites, “will have good leverage once the ad spending picks up,” Mr. Zaino said.

His firm, which last bought 6,000 shares of the company on June 26 for $3.36 apiece, now holds about 1.3 million Modem Media shares, bringing its total stake of the company to about 5%.

Mr. Zaino said he expects U.S. advertisers to revive spending next year, leading to a 25% to 30% growth rate for Modem Media.


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