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Modem Media drops AT&T

Losing one of its biggest clients won't stop Modem Media.Poppe Tyson Inc. (Nasdaq: MMPT) from meeting analyst estimates, the company said Tuesday.

After market close Tuesday, the Internet marketing agency announced the end of its relationship with AT&T Corp. (NYSE: T). But the company said it still expects to meet Wall Street forecasts. First Call's survey of two analysts predicted a loss of 21 cents a share for Modem Media in 1999, including losses of 6 cents a share for the current quarter and the next one, and a loss of 4 cents a share in the fourth quarter.

"Based on worldwide demand for our services including recent client wins, our global expansion strategy, and comfort with our current revenue forecasts, the time was right to make this move," said G.M. O'Connell, chairman and CEO of Modem Media.

According to Modem Media's 1998 annual report, AT&T was its largest customer, generating 20.7 percent of Modem Media's revenue last year. Modem Media posted total sales of $42.5 million in 1998.

Modem Media was one of two advertising agencies involved with developing and marketing AT&T's websites, AT&T spokesman Burke Stinson said. Both sides characterized the relationship's termination as a split over creative and philosophical directions for AT&T's Web marketing strategy.

AT&T, which is generally trying to streamline its number of suppliers, has been planning to use just one Web marketing agency instead of two, Stinson said. "Modem Media made it easy by saying they'd rather not bid," Stinson said. "The agreement was to amicably part ways."

The current contract with Modem Media, which started working with AT&T in 1992, will end in September, Stinson said. Modem Media's contracts can generally be terminated with 90 days notice. Contract wins recently announced by Modem Media include deals with General Motors and 3M.

Shares of Modem Media gained 1/16 to 25 3/16 in Tuesday's trading prior to the announcement of the company's departure from AT&T's business. The company, which went public in early February, is down more than half since peaking at 55 1/8 in April.>