Modem Media Cuts Staff in International Pullback

Share this content:
Interactive agency Modem Media Inc. yesterday said it was pulling out of all international markets it had a presence in except for London and Sao Paolo in Brazil.

The Norwalk, CT, agency will close offices in Toronto, Munich and Hong Kong, laying off staff in those cities as well as reducing headcount by 90 people in domestic and foreign offices. It also will trim office space in Norwalk and London.

"What we found is that we had maintained the international locations as investments in markets that we were developing, but we found that given the local market conditions, we felt that we did not have the potential to reach the size and scale to be the dominant players in those markets," said Frank Connolly, chief financial officer of Modem Media.

The agency will divest local clients in its foreign offices over three months.

As a result of these moves, the company estimates pre-tax charges of $12 million and cash costs of $4 million for implementation. It also will absorb an impairment charge of $3 million to $4 million for adopting new goodwill accounting rules.

Despite the setbacks, Modem Media is projected to show revenue of $70 million to $75 million this year, "and the level of profitability is very strong going forward," Connolly said. Revenue last year was $103 million.

As of May 31, Modem Media had $45 million cash on hand. After the job cutbacks, it will have 310 employees worldwide in its Norwalk, San Francisco, London and Sao Paolo offices.

The 15-year-old agency has clients including General Motors Corp., Eastman Kodak Co., Kraft, Michelin, Delta Air Lines, IBM Corp. and Philips Electronics.

Interpublic Group of Companies Inc., a leading advertising agency holding company, owns 43 percent of Modem Media.

Connolly said the agency's retreat had much to do with the economy.

"Clients are cautious in their spending," Connolly said. "They're also watching the economic recovery in the U.S., and they're cautious about increasing their overall interactive marketing spending."


Next Article in Direct Mail

Sign up to our newsletters

Company of the Week

Since 1985, Melissa has helped thousands of companies clean, correct and complete contact data to better target and communicate with their customers. We offer a full spectrum of data quality solutions, including global address, phone, email, and name validation, identify verification - available for batch or real-time processes, in the Cloud or on-premise. Our service bureau provides dedupe, email/phone append and geographic/demographic append services for better targeting and insight. For direct mailers, Melissa offers easy-to-use address management/postal software, list hygiene services and 100s of specialty mailing lists - all with competitive pricing and excellent customer service.

Find out more here »

Career Center

Check out hundreds of exciting professional opportunities available on DMN's Career Center.  
Explore careers in digital marketing, sales, eCommerce, marketing communications, IT, data strategies, and much more. And don't forget to update your resume so employers can contact you privately about job opportunities.

>>Click Here

Relive the 2017 Marketing Hall of Femme

Click the image above