PurchasePro.com Tumbles After Projecting Shortfall

Shares of PurchasePro.com (PPRO Quote) were slashed by nearly one-third after the company warned on the day of its scheduled earnings release that the results would be below consensus estimates.

The terse, two-sentence release said the shortfall was primarily due to the deferred recognition of certain license revenue.

In midday trading, the stock was off $1.99, or 32%, at $4.23. The shares are off 85% since the end of January. Analysts expect the company to earn 8 cents a share on revenue of $41 million, according to Thomson Financial/First Call.

Dresdner Kleinwort Wassertein analyst David Garrity downgraded the stock from a buy to a hold after the news came out, citing the warning, as well as ongoing credibility concerns at the company. (His firm hasn't done underwriting for PurchasePro.)

Since last fall, PurchasePro has repeatedly faced criticism for what some observers deem aggressive accounting, as well as the unorthodox way the company's management team, led by CEO Charles Johnson Jr., conducts business, especially in communicating with Wall Street and the press.

Wednesday's preannouncement only helped underscore that impression on Wall Street.

The news overshadowed the announcement last night that the company had finally hired a chief financial officer. After Tuesday's closing bell, the company said board member Richard Clemmer, formerly CFO of Quantum(DSS Quote), would take the post. The appointment ended a months-long search that had frustrated investors who are concerned over the way the company keeps its books.

The company is scheduled to release official results after the close of trading.