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PurchasePro falls on profit warning, delayed report

Shares of PurchasePro fell 32 percent Wednesday after the company issued an 11th-hour profit warning, told investors it would report first-quarter earnings after the market closed and then delayed them until Thursday morning.

PurchasePro shares fell $2.22 to $4. It was a day of heavy trading sparked by two press releases totaling three paragraphs that left Wall Street analysts confused.

The business-to-business software company issued a curt press release early Wednesday, and said it will fall short of estimates in the first quarter. PurchasePro said it expects "results to be below consensus estimates, primarily due to the deferred recognition of certain license revenue."

A PurchasePro spokesman said he couldn't comment and added that the company's earnings conference call after the closing bell Wednesday would clear things up. Then that was delayed until early Thursday morning.

Worries about the company's first-quarter earnings cut into the company's 49 percent gain last week and overshadowed the long-awaited appointment of a new chief financial officer Tuesday.

It was quite a reversal of fortune for PurchasePro. Shares surged last week, albeit from lower levels, on optimism that the Las Vegas-based company would top estimates.

First Call's current consensus for the company predicts earnings of 8 cents a share and revenue of $41 million. Analysts had expected the company to top estimates. Lehman Brothers analyst Patrick Walravens had said in a Wednesday morning research note that he was anticipating $42 million in revenue and earnings of 10 cents per share, one of Wall Street's higher estimates.

In a follow up research note, Walravens said he was reserving further judgment until PurchasePro reports earnings. "Obviously the press release took us by surprise," said Walravens, who noted that PurchasePro also deferred revenue in its third quarter.

Other analysts weren't so forgiving. David Garrity, an analyst at Dresdner Kleinwort Wasserstein, cut PurchasePro to a "hold" from a "buy."

Garrity said PurchasePro's terse profit warning without any explanation raises credibility issues. He said that it's likely that the company's high-profile partnership with AOL Time Warner (NYSE: AOL) isn't delivering.

"We suspect that marketplaces being sold through AOL as a reseller have not been placed with final customers," said Garrity. "If this is the case, we question why (PurchasePro) waited nearly a month after the close of the quarter to disclose this, especially given recent indications from the firm that it would make its numbers."

The warning overshadowed the company's long-overdue appointment of a new chief financial officer. After market close Tuesday, the company hired Richard Clemmer, former CFO of Quantum.

"Clemmer's experience as CFO of a multi-billion-dollar technology company will be invaluable for PurchasePro," Walravens wrote in a report.

The profit warning isn't the first time PurchasePro has had problems with Wall Street.

In February, Barron's magazine trashed the stock and accused the company of lacking a CFO. Though the company had an acting CFO, James P. Clough, it has been public about its search for a more experienced candidate.

PurchasePro countered by topping estimates for its fourth quarter and followed up by boosting its first-quarter outlook and expanding a partnership with AOL Time Warner. PurchasePro reported earnings of $7.6 million, or 11 cents a share, on sales of $33.6 million in the fourth quarter.

ZDII's Larry Dignan contributed to this story.