The bulls in
stock got some ammunition Wednesday in their battle with short-sellers.
Shawn McGhee, a 37-year-old executive who previously ran
North American operations, was named the company's chief operating officer, putting him in charge of day-to-day operations. He should already be pretty familiar with PurchasePro because Office Depot is the company's biggest customer. The move frees up Chris Carton, the company's president, to concentrate on making deals.
Bulls saw McGhee's corporate pedigree as comforting in light of recent questions about PurchasePro. After all, McGhee is from a
company. He's been responsible for Office Depot's 950 stores and 35,000 employees. So PurchasePro's stock climbed $1, or 7.2%, to $14.88.
"You know he's got to know more than you do," says Patrick Walravens, an analyst at
who rates the stock buy. "Here's a guy who did a lot of due diligence before taking the job." (Walravens' firm hasn't done underwriting for PurchasePro.)
reported its latest quarterly numbers in October, short-sellers, who profit when a stock falls, have raised questions over a big rise in the company's accounts receivable, a flattening of its recurring revenue, and $5.3 million in deferred revenue that seems to be
anything but money in the bank.
Office Depot has had its own issues.
Earlier this month, the company said it expected "negative" same-store sales in its fourth quarter, and its stock has plunged more than 70% since hitting an all-time high at the beginning of 1999.
Office Depot's warning followed a management shake-up this summer when Bruce Nelson replaced David Fuente as CEO. It was Fuente who hired McGhee at Office Depot.
"Fuente left and I left three weeks later," McGhee says. "He hired me and promoted me at the company
several times in 2 1/2 years, and with the new structuring of the company, they got a new CEO, and I was attached to the old CEO, so I left, too."
He says Office Depot's problems shouldn't reflect on him.
"Office Depot's troubles are isolated really to retail, and I was only over retail a short length of time. I only presided over North America, which included retail, for five months," McGhee says.
McGhee says the issues concerning PurchasePro's numbers weren't lost on him. And before accepting the job, he spent days with the company's top exectives, grilled the company's lawyers and even probed its auditors.
"The questions I put to the auditors were whether these issues are something that's specific to PurchasePro, or a challenge within the industry," he says. "The response I got back was that these are industry-type challenges that are in the Web industry. They said they don't see an issue with PurchasePro or its management team. Obviously, when you look at the volume of pronouncements out of the
lately, it's obvious that they're trying to move the accounting issues along to catch up with what's happening in the industry."
The question at PurchasePro has been whether the company's penchant for somewhat unusual practices are a sign that something is amiss, or whether it's simply a sign of an unorthodox, unpolished management team that's learning as it goes.
"Let's call a spade a spade," Lehman's Walraven says. "There's a ton of stuff, that if you want to bash the stock, you can. Whether it's the way conference calls are run, or even conversations that the CEO has had with reporters that he probably shouldn't have, there are some very basic things, it seems, that McGhee can do."
Walraven says McGhee is "a professional manager" and "the sort of guy when you take him out to investors, he's going to be able to sell them." But while Walraven sees McGhee's addition as a major plus for the company, he also concedes that, "I think it's the right attitude to take that these guys have to prove themselves."
Which is exactly what PurchasePro is hoping McGhee will help it do.