Stock Watch: Smaller Loss, Profit Projection Fail To Lift PurchasePro

Another B2B company, PurchasePro, Inc. (Nasdaq: PPRO), also fell despite reporting stronger-than-expected quarterly results. PurchasePro sank 7 15/16 to 32 5/16 Wednesday, even after reporting a smaller-than-expected loss and predicting a profit for the fourth quarter. Unlike other issues, the stock failed to recover from an early sell-off.

The company said revenue for the quarter rose to $17.3 million from $1.67 million in the same period last year, while the net loss before charges narrowed to $4.7 million, or 7 cents per diluted share, from $3.67 million, or 12 cents.

Chairman and chief executive officer Charles E. Johnson, Jr. said the company’s “tremendous business efficiencies” led to gross margins above 90 percent for the fourth quarter in a row.

“Because of our recurring revenue model, we will begin the fourth quarter with a significant percentage of the revenue generated in the third quarter,” Johnson said. As a result, he said, the company is projecting a profit for the fourth quarter.

Partnerships with companies such as Computer Associates and Gateway Computer helped drive results in the latest quarter, Johnson said. “Computer Associates enables our company to leverage CA’s 3,000-member sales force, while Gateway puts us on millions of its desktops shipped to small and mid-sized businesses.”

Alliances with America Online, Sprint and Office Depot also give the company recurring revenue and “substantial financial returns,” PurchasePro said.

“The company’s third quarter performance validates the strength and unique nature of our business model,” said Johnson. “We have exceeded all expectations with our results, including analysts’ estimates of 45 percent sequential growth.”

Part of the bottom-line improvement was due to a delay in the recognition of some America Online charges, according to Lehman Brothers, which nevertheless called the results “strong” and continues to rate the stock a buy.

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