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Investors cheer PurchasePro CEO's exit

Shares of the online sales company jump on news that Chairman and Chief Executive Charles "Junior" Johnson has left.

PurchasePro shares jumped Monday on news that Chairman and CEO Charles "Junior" Johnson resigned. Johnson's exit is just the latest chapter in the long-running PurchasePro saga.

Shares of the company were up 39 cents to $2.97 by market close. PurchasePro helps businesses sell goods and services online to other businesses through buying-and-selling communities, or e-marketplaces.

R. Todd Bradley, a member of the board of directors, will succeed Johnson as chairman. A company spokesman said the company's day-to-day operations will continue to run as usual until a new CEO is named.

Johnson was at the helm as PurchasePro endured a host of investor-relations gaffes. The most recent mix-up was a terse fourth-quarter profit warning, issued by the company, that was devoid of any detail. The profit warning, which came just hours before PurchasePro was scheduled to report its earnings, was just the beginning. The company then postponed its results as it double-checked its accounting. When PurchasePro did deliver its quarterly results, Wall Street analysts didn't want to hear the company's explanations.

Analysts said Johnson's departure may give PurchasePro a boost in the credibility department. "This helps alleviate concerns around management and integrity," said Pawan Malhotra, an analyst with SG Cowen. "There was some concern from investors that Junior Johnson didn't have the requisite skills to run the company."

Wall Street's perception of PurchasePro management has been an issue in the past. Johnson, who has a Southern drawl and a lot of flare, didn't fit Wall Street's CEO mold. PurchasePro is also based in Las Vegas, out of the way from media and technology centers.

PurchasePro also suffered as it ushered executives through a revolving door. In recent months, the company named a new chief operating officer and a new chief financial officer. In February, PurchasePro shares plunged when Barron's accused the company of being something of an "old boys' club" with lax financial controls.

"Today's news has the potential to be a long-term positive, as the company now has a chance to bring in a more experienced and credible management team," said Wedbush Morgan Securities analyst George Santana.

With Johnson out of the picture, new CFO Richard Clemmer, who joined PurchasePro last month, is likely to share the spotlight with COO Shawn McGhee. In a company statement, Clemmer said PurchasePro will "work to develop a strong course of action to reinvigorate the company" and deliver strong financial returns.

Analysts speculated that McGhee would be named CEO. Before joining PurchasePro, McGhee was president of Office Depot's North American operations

Even though Malhotra views Johnson's departure as a positive development, he kept his "neutral" rating on the stock. It will take at least two quarters for the new management team to pull things together and prove themselves through solid financial performance, Malhotra said.

Other analysts also took a wait-and-see approach. Prudential Securities analyst Tim Getz said Johnson's departure was a positive, but also noted that PurchasePro delayed its quarterly filing with the Securities and Exchange Commission, typically a bad sign.

Getz, who rates PurchasePro a "sell," said PurchasePro's 10-Q filing may include some unwelcome surprises "for which Johnson may be taking the fall."