Watch This Sleeper (Nasdaq: PPRO) has been toiling away in relative business-to-business obscurity while players such as Ariba (Nasdaq: ARBA), Commerce One (Nasdaq: CMRC) and VerticalNet (Nasdaq: VERT) hog the spotlight. (Nasdaq: PPRO) has been toiling away in relative business-to-business obscurity while players such as Ariba (Nasdaq: ARBA), Commerce One (Nasdaq: CMRC) and VerticalNet (Nasdaq: VERT) hog the spotlight.

But that situation may change in the next few quarters, as the company rolls out a high-profile partnership with America Online and continues to deliver strong revenue growth. On Aug. 16, PurchasePro announced the "soft launch" of its B2B destination codeveloped with AOL.

To start, let's recap a few reasons why PurchasePro has a market capitalization slightly above $1 billion, while its peers are many multiples higher. We'll start with Charles Johnson Jr., chairman of the company, who doesn't come from the usual blue-flannel CEO factory. Johnson has a southern drawl and a lot of flair. Though he sports blonde hair and a tan and didn't go to Harvard, he's quite convincing.

PurchasePro, which is based in Las Vegas, also didn't have flashy initial public offering underwriters, which means there weren't big-time brokerages talking up the stock. Then, toss in the fact that PurchasePro's revenue base is relatively small - it relies on transaction fees and network effects from small and midsize businesses - and you can see why the spotlight hasn't hit the company in a big way. But if PurchasePro's deals with Office Depot and AOL deliver as expected, the company will soon find itself in the limelight.

Analysts such as Lehman Brothers' Patrick Walravens are starting to believe what PurchasePro is preaching. "We think PurchasePro has operated under the radar screen," Walravens says.

Walravens is projecting sales of $14.3 million in the third quarter, and Johnson said he's more than comfortable with that target. PurchasePro is expected to break even in the second quarter of 2001.

What does Johnson have to say about the company's prospects?

On the AOL partnership: The soft launch is under way and PurchasePro will roll out new features over the next two quarters. From the start, Johnson expects PurchasePro to gain 4 million impressions from small-business users. "This opportunity is so much larger than anyone expected," Johnson says. "It'll give us a lot of traction."

Johnson adds that AOL is also using PurchasePro internally. PurchasePro will also add AOL's ease of use and features such as instant messaging. The rollout will occur in phases, with a fully integrated product completed early in the first quarter.

On the PurchasePro model: Johnson says that in the next few quarters, B2B watchers will begin to differentiate by revenue growth and the type of revenue generated. PurchasePro is linking up with companies that will not only use its software to buy and sell goods, but become sources of future participants. If PurchasePro succeeds, its revenue model will be hard to duplicate.

"There's a significant difference between recurring revenue and deferred revenue," Johnson says. "In the first quarter, our product will have the ability to reach a critical mass of users and exchanges that will be linked exchange to exchange."

"It'll all be flushed out soon - the companies that make the most money win the game," he says.


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