PurchasePro stock plunges on earnings warning — release of numbers delayed

Kevin Ferguson

Wednesday, April 25, 2001 | 3:50 a.m.

PurchasePro shares plunged nearly 35 percent to $4.05 Wednesday after the Las Vegas-based Internet business disclosed that its first-quarter results will fall short of forecasts.

The reason: the company couldn't record sales it had expected to under certain licensing agreements until next quarter, the company said in a statement on its website.

PurchasePro, which develops marketplaces for businesses to buy and sell products on the Internet, declined further comment until its conference call announcing its earnings.

The conference call and the release of the earnings were scheduled for Wednesday afternoon. But late Wednesday, the company said it's delaying both until Thursday morning.

David Garrity, an analyst of Dresdner Keinwort Wasserstein who downgraded PurchasePro's stock this morning to a "hold," said it's unusual for a company to pre-announce an earnings shortfall hours before it was to issue its official quarterly earnings.

"Most companies that knew they were missing earnings when the quarter ended announced that they would the first week in April," Garrity said. "PurchasePro came out March 28, when it announced (details) of (a) deal with AOL, and said it was going to make those (estimates)."

Garrity's report Wednesday morning said PurchasePro's earnings' shortfall may indicate the company is having difficulty closing deals with customers through its AOL marketplace.

"This issue, coupled with ongoing credibility concerns, compels us to downgrade the shares to 'Hold' from 'Buy,"' his report states.

The company, which employs about 550 people, was anticipated to report quarterly profits of 8 cents per share, according to an average of 10 analysts' estimates polled by Thomson Financial/ First Call. The first quarter ended March 31.

This news overshadows the announcement Tuesday that the company had finally hired a chief financial officer, Richard Clemmer, formerly CFO of Quantum. This appointment ended a month-long search, which frustrated investors who were frustrated over how the company kept its books.

PurchasePro shares hit a 52-week low just over two weeks ago, when they sunk to $2.45 on April 9.

Some analysts have been critical of PurchasePro's business practices as well as the state of the business-to-business tech sector.

Earlier this month, Wedbush Morgan Securities analyst George Santana criticized the company for "aggressive accounting" practices.

For example, the company's reporting of revenues from software sales to a strategic partner, on a gross basis, and concurrently capitalizing the offsetting -- and larger -- purchase of software from the same strategic partner directly into assets, his report states.

"Depending on one's perspective, this served to overstate revenues or implied cash flow for the quarter," Santana states in his report.