VerticalNet Bests Expectations, Joins B2B Joint Venture

VerticalNet will be a majority shareholder in the business-to-business joint venture.
Author:
Publish date:

Updated from 9:15 a.m. EST

Business-to-business e-commerce company

VerticalNet

(VERT)

said Tuesday afternoon that strong revenue and improved cash flow enabled it to post a smaller-than-expected loss.

The company also announced a 2-for-1 stock split.

The announcements capped a busy day for VerticalNet. Earlier, it said it had agreed to a $227 million partnership with

British Telecommunications

(BTY)

and

Internet Capital Group

(ICGE)

to form

VerticalNet Europe

.

VerticalNet will be a majority shareholder in the joint venture, which will be started with a contribution of cash and assets from the three partners. Separately, VerticalNet said it would create

VerticalNet UK

together with British Telecom.

Shares of VerticalNet of Horsham, Pa., surged 13 7/8, or 5.8%, to end the Tuesday trading session at 252 1/8. Following the announcement, which was posted after the close, VerticalNet rose to 254 before falling back to 248, according to

Instinet

.

The company reported a fourth-quarter pro forma net loss of $15.28 million, or 28 cents a diluted share, compared with a net loss of $5.26 million, or 21 cents a share, in the year-ago period.

Wall Street had expected a loss of 34 cents a share, based on a survey of 14 analysts conducted by

First Call/Thomson Financial

.

"It looks like a very good quarter for VerticalNet. They beat our estimate on the top line," said Rob Damron, an analyst at

Tucker Anthony Cleary Gull

.

Revenue for the quarter surged to $10.09 million, compared with $1.27 million in the fourth quarter of 1998. Damron, who had expected revenue of $7.4 million, attributed the unexpected surge to the company's ability to generate revenue from e-commerce transactions and its brokerage business, and not just from advertising.

He said the company also reined in its expenses, contributing to a better-than-expected cash loss. VerticalNet posted a cash loss of $10.2 million for the quarter, well below Damron's anticipated loss of $12.5 million.

Damron, who rates VerticalNet a strong buy and whose firm has not done any underwriting for the company, added that he expects it to break even by fourth-quarter 2001.

VerticalNet also announced Tuesday several managerial changes. Michael Hagan, VerticalNet's co-founder and executive vice president, was named chief operating officer.

Mario Schafer, VerticalNet vice president of business development and international, was named the acting chief executive officer of VerticalNet Europe, a unit that hopes to kick-start Europe's business-do-business activities.

"The formation of VerticalNet Europe will enable thousands of businesses throughout Europe to reap immediate e-business benefits,'' said Ben Andradi, managing director of

BT Internet and eBusiness

. "The sheer variety of information, communication and trading opportunities will make the concept of trading communities virtually impossible to ignore.''

The online trading communities within each industry allow participants to home in on news and information, communicate with suppliers, and enter auctions for their material needs.

"With VerticalNet Europe we are entering into the Internet's next hypergrowth market," said Mark Walsh, VerticalNet's president and chief executive. "Partnering with BT and Internet Capital will allow us to exploit this opportunity very rapidly, as our simultaneous creation of VerticalNet UK demonstrates."