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Millennial Media Tumbles After Jumptap Deal, Sales Shortfall

Millennial Media Inc. fell the most in almost six months after reporting slower-than-projected sales growth and announcing plans to buy Jumptap Inc., a competitor in the market for mobile-device advertising.

Millennial shares tumbled 19 percent to $6.90 at the close in New York, marking the biggest one-day decline since Feb. 20.

The company is counting on the Jumptap deal to help it mount a bigger challenge to Google Inc., the largest seller of mobile ads. Still, the acquisition comes at a steep price for Baltimore-based Millennial, whose own market valuation is $555 million -- with 81.4 million shares outstanding. The company will pay about $200 million for Jumptap.

“It’s new information for the market, so I think the choppiness you see will come from a little bit of uncertainty as we put more out there,” Millennial Chief Executive Officer Paul Palmieri said in an interview. “People are potentially building in some of the dilution that’ll occur. As investors understand the story, I think they’ll get more and more confidence in it.”

Millennial’s sales grew 45 percent to $57 million in the second quarter, the company said yesterday in a statement. That fell short of the average analyst estimate of $59.2 million, according to data compiled by Bloomberg. Excluding some items, earnings were 2 cents a share, beating an estimated 1-cent loss.

Deal Terms

Jumptap investors will get about 24.6 million Millennial Media shares, based on their Aug. 9 price, according to a separate statement yesterday. The stock closed at $9.13 that day. Jumptap investors had originally planned for an initial public offering before Millennial went public last year and started slipping in the stock market.

Millennial is the only publicly traded company focused solely on mobile advertising. The performance of its stock, which has now fallen almost 50 percent since the IPO in March 2012, has cast a shadow on similar companies tapping public markets. Video-ad provider YuMe Inc. lowered its IPO price last week because of slack demand, while Tremor Video Inc. has tumbled since its IPO., meanwhile, opted instead for a sale to AOL Inc.

Jumptap, based in Boston, has expertise in real-time bidding on ads and creating campaigns that reach users on different screens. Its ads are seen by more than 218 million mobile users in the U.S. and 439 million worldwide, according to the statement.

Jumptap’s Backers

Founded in 2005, Jumptap raised $121.5 million in venture funding as of last year. Its investors included General Catalyst Partners, Redpoint Ventures LLC, Summerhill Venture Partners, Valhalla Partners LP, WPP Plc and Keating Capital Inc.

Jumptap Chief Executive Officer George Bell, who joined in 2010, refocused the company on targeted mobile advertising, instead of mobile-search products. At the time, he cut its staff of 80 by about half and then aggressively began hiring. The closely held startup now has about 200 employees.

Combined with Jumptap, Millennial Media’s market share in mobile advertising would have been 28.7 percent in 2012, while Google had 29 percent, according to IDC research.

“If you look at the history of these things, acquisition of market share and growth of your footprint in very large, evolving places like this is well rewarded in the long term,” Bell said in an interview. ’’And you’re going to have to deal with Wall Street’s reaction.’’

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