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PurchasePro and AOL boost e-business initiative

PurchasePro and AOL announced Wednesday they would extend their B2B and e-commerce efforts by inking 10 new agreements to develop the Netscape Netbusiness marketplace.

Investors responded with cautious enthusiasm for the deal as shares in PurchasePro (Nasdaq: PPRO) moved up 13 cents to $7.38 in early trading. PurchasePro is a business-to-business e-commerce company that operates electronic marketplaces designed to connect buyers and sellers over the Internet. AOL Time Warner (NYSE: AOL) was off $1.49 to $41.51.

Last week, PurchasePro shares slipped on a downgrade from Prudential Securities analyst Tim Getz, who flagged concerns about the Netscape marketplace.

Getz cut his rating from “accumulate” to “hold,” citing a low conversion rate of registered users into paying customers. In fact, he cited the company's deal with AOL Time Warner’s Netscape as a problem. Internet businesses continue to register on Netscape's Netbusiness site, but the numbers of those businesses who became paying customers "were far below expected minimal thresholds," Getz wrote.

AOL Time Warner and PurchasePro said Wednesday they had inked 10 new agreements, including deals with Hewlett-Packard (NYSE: HWP), (Nasdaq: HOMS) and Spherion (NYSE: SFN). The deals will expand the Netscape marketplace.

Getz said in phone interview Wednesday that the deals don't change anything for the company's financial outlook. "We had a certain amount of AOL licensing agreements built in (to our model)" Getz said.

Launched by AOL and Netscape in September, Netscape Netbusiness provides a free meeting place on the Internet for owners of small businesses using a "Netbusiness Card." Members can create an online storefront, and connect with one another using message boards and a custom Instant Messenger platform.

AOL Times Warner and PurchasePro also announced a joint sales and marketing operation for the marketplace which will include executives from both companies. They had already announced expanded marketing efforts Jan. 31, which included a Netbusiness television advertising campaign on CNN.

Getz said the marketing deals were nothing new, and aren't likely to do anything to help conversion rates. "Its too early to tell if things have changed," on that front, he said. "My guess is it will take a bit more time."

"The conversion rate issue, while important, is nothing new," said Patrick Walravens of Lehman Brothers. "The key to getting all these things going is liquidity though, you've got to have enough people in the marketplace."

Walravens was confident the AOL deal would pay off for PurchasePro. "Look who they signed up today--HP, people wouldn't attach themselves to the Netbusiness marketplace if they didn't think it was going well," he said.

What's more, Wednesday's deals may be a sign of things to come, Walravens said. The analyst added in a research note that they may be "only a portion of the deals AOL and PurchasePro have closed to date." He expects the balance of deals to be announced in coming weeks, and added that "with 200 AOL sales people focusing on this business the number of new deals will continue to increase."

Walravens, who has a "buy" rating on PurchasePro, also estimated that today's deals could be worth anywhere from about $1.2 million to $3.7 million each for AOL and PurchasePro.

Other agreements announced Wednesday included ones with BroadVision (Nasdaq: BVSN), TheThread, Plant America, Viva Magnetics, eFruit, ProfitScape and