PurchasePro's New CEO Starts by Admitting the Obvious

The company's credibility gap is a problem that needs fixing, says Richard Clemmer.
By Joe Bousquin ,

The first job of

PurchasePro.com's

(PPRO)

new CEO was to point to the big, pink elephant that's been sitting in the company's lobby for quite some time.

"It is eminently true that PurchasePro suffers from a credibility gap," said a statement from Richard Clemmer, who was named on Tuesday to succeed ousted founder Charles Johnson Jr. as CEO.

While distancing the procurement software company from Johnson -- the press release pointed out in its first paragraph that Johnson had resigned and "left the company" -- Clemmer said now is "the dawning of a new era at PurchasePro; a new watch." The company's past problems "will be overcome and resolved with due, but deliberate, dispatch," he said.

Shares of PurchasePro were up 6% on the news, or 13 cents, to $2.31. Monday, the stock gained 19.7% amid speculation that Clemmer would be named CEO, a likelihood

TheStreet.com

pointed to last week.

Since last fall, PurchasePro has suffered numerous public relations and accounting embarrassments while suffering through a law suit that alleges Johnson stole the business plan for the company when he founded it in 1996. Johnson denies those allegations. But Wall Street money managers never warmed to Johnson's Kentucky drawl or the fast-and-loose impression that Johnson gave them, which was only bolstered by his choice of Las Vegas for the company's headquarters.

Clemmer's resume couldn't contrast more starkly with Johnson's. While Johnson operated video-rental stores and a security business in Kentucky before moving west to Las Vegas, Clemmer counts data-protection giant

Quantum

(DSS) - Get Report

and semiconductor behemoth

Texas Instruments

(TXN) - Get Report

among his past employers. Clemmer, who was CFO at Quantum, was named PurchasePro's CFO May 16, filling a long-vacant gap in the company's management ranks.

Johnson's forced resignation from the company came less than a week later.

Clemmer will continue to act as the company's CFO until a new person is found to fill that slot.

Despite the company's stumbles, some Wall Street analysts have continued to support PurchasePro.

Lehman Brothers'

Patrick Walravens, who has maintained his buy rating on the stock as others have downgraded the company to sell, said the firm's customers consistently praise PurchasePro's products and level of service. His firm hasn't done underwriting for PurchasePro.

In his statement, Clemmer said he would use that strength as a basis for making a new start at the company.

"We are currently refining our business strategy to support our strong product strategy," Clemmer said. "I expect to announce new initiatives and a new approach during the coming weeks."

Analysts Tuesday saw the announcement as marginally positive, though they said the company still has hurdles to overcome.

"While this announcement adds some stability to PPRO, there remain many open issues for the company, in our view," wrote

Prudential Securities

analyst Tim Getz in a research note. Those issues include the company's cash position, its lack of any meaningful financial guidance for the remainder of 2001 and how many customers are actually using its network. Getz has a sell rating on the company; his firm helped underwrite PurchasePro's

initial public offering.

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