VerticalNet

(VERT)

has been the business-to-business darling

du jour

for several

jours

lately.

And on Tuesday, investors again pushed up the stock after it was disclosed that VeritcalNet had

swiped

Amazon.com's

(AMZN) - Get Report

president and chief operating officer, Joseph Galli, who will take over the company's CEO post from Mark Walsh. Walsh will become chairman. The stock was up about 3%.

On Wednesday, when the company reports earnings after the close, investors will see if this love lasts.

VerticalNet, a B2B firm that builds Internet commerce sites for specific industries, is expected to report a loss of 30 cents a share after the end of regular trading Wednesday, according to 24 analysts surveyed by

First Call/Thomson Financial

.

But, as with all B2Bs, it will be revenue that matters. On that score, analysts have been projecting VerticalNet to come in at $38 million to $43 million. Except none of them

really

expects that. One of the reasons VerticalNet got an 8% pop last week -- and continued to rise on Monday -- is because people are whispering about revenue as high as $55 million.

Which means there could be some pullback in the stock if it only beats its numbers by, say, $7 million or $8 million on Wednesday, when fellow B2B firms

Clarus

(CLRS)

and

webMethods

(WEBM)

are also scheduled to report. On Monday, VerticalNet closed up 1 3/8, or 2.5%, at 56 3/4. And because of its 55% surge since July 12, when Ariba reported, there's likely to be selling on the news no matter what the results are.

Investors Turn To VerticalNet
The stock's been enjoying a bump up.

Like

Ariba

(ARBA)

,

Commerce One

(CMRC)

and

PurchasePro.com

(PPRO)

before it, analysts have been talking about the company having a very big quarter when it reports.

Jamie Friedman, the B2B analyst at

Goldman Sachs

, upgraded VerticalNet last week to the firm's recommended list, its highest rating, from market outperform.

"I think VerticalNet will probably place second, behind Ariba, in terms of exceeding expectations this quarter," said Friedman. "They'll have considerable

upside surprise." (His firm hasn't performed underwriting for the company.)

Selling Chips

Fueling VerticalNet's numbers will be revenue from its

New England Chip Exchange

, or NECX, which has been enjoying higher profit margins lately because of strong demand in the spot computer-chip market. With its other two chip exchanges, Goldman estimates VerticalNet has 10% of the U.S. chip-trading business. Not bad for a B2B start-up. Those exchanges are forecast to account for nearly half of the company's revenue in the quarter.

"It's operating one of the largest secondary marketplaces for electronics and components in the United States," says Tim Getz, an analyst with

Prudential Securities

who rates the stock a buy. (His firm helped underwrite VerticalNet's

IPO last year.) "Because of that, I'm expecting the top line to show close to 20% upside from expectations."

VerticalNet, unlike B2B software suppliers Ariba and Commerce One, is largely billed as a "sell-side" solution for suppliers wishing to do business over the Internet. That's an important distinction, because most highly valued B2B companies right now are focused on the "buy side" of the B2B equation. Those firms aim to help major corporations like

General Motors

or

Boeing

buy the supplies they need to conduct business.

In contrast, VerticalNet, with its highly targeted business-content sites -- take a look at

Surface Finishing online -- is trying to provide another sales channel for companies that want to sell products over the Internet.

Storefronts

In order to do that, it builds electronic "storefronts" for its customers and posts them on its network, hoping their very specific content will attract the types of buyers those suppliers want. Because some suppliers see B2B exchanges as a threat, VerticalNet, by giving them leads on potential customers, may offer a more friendly B2B option. That approach has apparently been working because analysts say the company has added about 5,000 storefronts this quarter for about 8,300 total, up from 3,302 at the end of last quarter.

"Basically, they're providing an avenue for suppliers to sell their products, and that's something that's very intriguing, something that a lot of people haven't done," says John Ederer, an analyst at

E*Offering

, who rates the stock a buy. (His firm hasn't done underwriting for the company.)

Because there's less competition in the sell-side area, a lot of folks on Wall Street like to talk about VerticalNet cleaning up, much like PurchasePro.com has carved out a niche for itself serving small- and medium-sized businesses.

"They're comparable to PurchasePro because they're in a space where there are a lot of very fragmented buyers and sellers," Getz says. "Because of that, there are a lot more benefits to sellers to participate in their marketplaces."

Ad Sales

Aside from its chip-exchange revenue, much of VerticalNet's revenue is derived from advertising it sells on its sites: Wanna reach industrial buyers of adhesives and sealants? Why not try placing an ad at VerticalNet's

Adhesives and Sealants.com?

"In advertising, of course, they've got a very clear value proposition," says Patrick Walravens, B2B analyst at

Lehman Brothers

. "They've got less of this 'Does the model fundamentally work at all?' that they're facing." (Walravens rates VerticalNet a buy, and Lehman was the lead underwriter on the company's IPO.) While some have fretted over declining advertising on the Internet, earnings results this quarter show that B2B spending has continued to ramp up.

Because of that positioning, some investors are looking to VerticalNet to be the top name for the sell side of B2B. With the huge premiums given to leaders within the B2B space, that could be an enviable position to hold down the road.