Update: Amazon President and COO Quits to Join VerticalNet

Updated from 1:45 p.m. EDT

Amazon.com (AMZN) President and Chief Operating Officer Joseph Galli has resigned to join business-to-business company VerticalNet(VERT) as president and chief executive officer, VerticalNet announced Tuesday.

Shares of Amazon, finished down 1 1/8, or 2.9%, at 37 5/8.

Galli will succeed Mark Walsh, who has been appointed chairman of VerticalNet. Michael Hagan, co-founder of VerticalNet, will continue as chief operating officer.

"Great companies know when to add power, and as president and CEO, Joe is capitalizing on VerticalNet's tremendous momentum while managing our fast-paced growth," Walsh said in a statement.

Goldman Sachs analyst Jamie Friedman said Galli's addition should be seen as bolstering VerticalNet management's strength. He noted that Hagan, the COO, moved into the background to let others run the company as it grew.

"In the war for talent, this is a huge win," Friedman said. "Joe brings with him the ability to meet the structural challenges of managing a company with 600 plus employees and multiple lines of business."

Friedman said Goldman will host a meeting on Friday with Walsh and Galli at New York's Harvard Club. Friedman placed VerticalNet on Goldman's recommended list last week, the firm's highest rating. Goldman has not performed underwriting for the company.

Investors, at least, didn't immediately see the switch at the top of VerticalNet one day before it announced earnings as a negative. VerticalNet finished up 5/8, or 1.1%, at 57 3/8.

Chatter about the impending resignation first emerged early in the morning, apparently based on a call that Donaldson Lufkin & Jenrette analyst Jamie Kiggen gave to his firm's sales force. Kiggen was unavailable for comment, but a spokewoman at the firm did confirm that he "did go out with a call on that this morning regarding this issue."

"That cushions the blow," said Dan Ries, e-commerce analyst at C.E. Unterberg Towbin, of the move to VerticalNet. It suggests that Galli had an economic incentive for leaving. It's far worse when an executive leaves for "personal reasons" -- which the Street has come to recognize as code for when a troubled company gives someone the boot. Ries rates Amazon a buy. His firm has done no underwriting for the company.

Amazon is scheduled to report its second-quarter results after the close on Wednesday, which may have pushed Amazon to announce the resignation Tuesday. "We suspect that Galli, knowing that he would make a move, didn't want to be on the conference call tomorrow," Ries said. "His absence would have been notable."

Galli, 42, joined Amazon a little over a year ago from Black & Decker (BDK), where he was president of the global power tools and accessories division. Ries noted that Galli received a significant signing bonus -- $3 million -- with the promise of another $3 million on his first anniversary with the company, and $2 million on his second. Galli got his second $3 million check on June 23. Any stock options that Galli received would be underwater -- Amazon's stock has been under heavy pressure all year as investors have questioned the sustainability of its business model -- and thus worthless.

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