Modem Media's new CEO focuses on future

With the initial Internet frenzy long gone, most wise investors are looking for survivors of Wall Street's version of tribal council to find tomorrow's industry leaders.

One local executive says the firms that will weather the storm will have the ability to adapt and transform while they perform.

Marc

Particelli was the keynote speaker at the Connecticut Technology Council's "Winning Internet Strategies" event held March 14 at the Trumbull Marriott.

Like so many companies with web-related businesses models, the Norwalk-based Internet professional services firm is attempting to transform while it performs.

Co-founder G.M. O'Connell turned his CEO position over to Particelli in January. O'Connell continues to serve as the company's chairman.

Founded in 1987, Modem Media is focused on leveraging opportunities and solving marketing and customer management problems facing global companies most impacted by digital change.

The firm employs about 850 people worldwide.

In March of last year, Modern Media was flying high as the company's stock price inched above the $50 a share mark. That was before the bottom fell out of the stock market for Internet-related issues. Things soon soured for Modem Media as well. A second stock offering was canceled in the second quarter of 2000, as the company's price per share continued to plummet; finally reaching its current trading range of about $3 a share.

Coincidentally, it was about the same time that Modem Media launched a new strategy that exchanged e-business for Me-Business (SM).

"The Me-Business approach is consistent with the Internet Bill of Rights. It's about putting in place the tools to support the customer's approach to the Internet," Particelli explained.

Particelli, who was adamant that there was no connection between the decline in Modem Media's stock and the introduction of MeBusiness initiative, said the moniker was introduced to create a brand for the company's approach to the Internet and consumers.

Revenue for the full year 2000 was up 81 percent from 1999 to $134.3 million, but the firm recorded a net loss of $74.2 million.

Modem Media had revenue of $35.2 million in the fourth quarter of 2000, up 44 percent from the fourth quarter of 1999. The net loss totaled $61.7 million.

The company attributed most of its 2000 losses to the write-off of $52.8 million in impairment from the acquisition of e-commerce developer Vivid Holdings Inc. in February 2000.

A company statement said prevailing market conditions for Internet startups hurt Vivid's ability to secure new assignments.

Particelli's assessment was that Modem Media "probably grew too fast" in recent years.

Particelli began his career with the consulting firm Booz Allen, where he worked for 21 years and held a series of senior management positions.

Prior to Modem Media, Particelli was a partner with two private equity firms - Oak Hill Capital Partner L.P. and Odyssey Partners L.P.

"We need as a firm to increase our ability to integrate digital marketing and digital customer management with the overall business strategy. If my background is anything, it's in helping major corporations build strategies and operating effectiveness in the application and marketing programs," Particelli said.

The executive, who holds a master's degree in business administration from Harvard Business School, said he brings management and operating disciplines that AU help take a rapidly growing entrepreneurial business and turn it into a sustainable "real" business. In recent months Modem Media has adopted cost-cutting measures to achieve that goal. The company laid off 131 employees, closed its Tokyo, Japan, office and reduced its leased space in other branches.

Modem Media also sold its equity position in CentrPort, a Westport information technology firm.

The company did report fourth-quarter earnings of $800,000, or 3 cents a share before the one-time charges associated with the acquisition of Vivid Holdings and the closing of the Tokyo operation.

Analysts say this is good news for Modem Media. Once the firm pays off the charges, it stands to benefit from reduced operating expenses and the profit seen before the charges last quarter may be a positive sign of things to come.

Five Wall Street analysts track Modem Media's stock. Their collective opinion of the company ranks its shares somewhere between a buy and a hold.

The analysts foresee a return to profitability in 2001, with earnings of 25 cents a share possible.

The composite analyst rankings placed Modem Media seventh out of 16 firms in the Internet marketing services sector.

To keep the company climbing up that list of competitors, Particelli said Modem Media will have to focus on "customer connections" defined as its relationships with its investors, employees and clients as well as their clients and investors.

Particelli also touched on the slowing national economy. He discussed how technology is enabling distributors and manufacturers to adjust inventories more rapidly when faced with changes in demand.

He called this "the best evidence against the possibility of a full recession."

"I kind of like the fact that the stock market is down, because I'm just getting in. And I, for one, am a buyer," he said.

Insider trading records show that in January Particelli purchased 10,000 shares of Modem Media stock at $5.16 a share.