(Updated from 10:46 a.m. EDT)

Amazon.com

(AMZN) - Get Report

President and COO Joseph Galli is resigning to join

VerticalNet

(VERT)

.

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 spokeswoman at the firm did confirm that he "did go out with a call on that this morning, regarding this issue." Midday, Amazon and VerticalNet confirmed the news of the move.

Amazon shares were down 1, or 2.6%, at 37 3/4 on heavy volume of 19.2 million shares. The stock earlier traded as low as 33 1/4. VerticalNet was up 1, or 1.8%, to 57 3/4.

Dan Ries, e-commerce analyst at

C.E. Unterberg Towbin

, said the fact that Galli is moving to VerticalNet "cushions the blow." 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.

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

Galli 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 he 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 dollar check June 23. Any stock options that Galli received would be under water -- Amazon has been under heavy pressure all year as investors have questioned the sustainability of its business model -- and thus worthless.