Stock Watch: Smaller Loss Fails to Boost VerticalNet

VerticalNet, Inc. (Nasdaq: VERT) was down 3 7/8 at 28 3/4 early Wednesday despite reporting a smaller-than-expected loss for the third quarter.

“The upside is coming from their offline activities,” said IJL Wachovia analyst Bob Fontana, who downgraded VerticalNet to buy from strong buy after the report. “E-commerce transaction revenue will come,” Fontana told the E-Commerce Times, “but it’s just taking longer to materialize.”

W.R. Hambrecht, meanwhile, reportedly repeated a buy rating on VerticalNet after the report.

Revenue for the quarter rose to $68.5 million from $5.2 million in the same period last year. The company reported a cash loss of 20 cents per share, against analysts’ expectations for a 29 cent loss. A year earlier, the company lost $25.83 million, or 15 cents per share.

“We’ve had another solid quarter and are excited about our progress,” said chief financial officer Gene Godick.

VerticalNet, based in Horsham, Pennsylvania, recently reorganized its business into separate units: VerticalNet Markets, which owns and operates marketplaces and provides services to small and medium-sized businesses; VerticalNet Exchange, which facilitates trading of electronic components in open and spot markets; and VerticalNet Solutions, which provides online marketplaces for large customers.

The company said it expects to report results for the solutions business separately beginning next year. The changes were made under new president Joseph Galli Jr.

Galli came to the company in July after leaving his post as president and chief operating officer of Amazon.com. “Joe has had a tremendous first quarter and a smooth transition,” said chairman Mark Walsh. “He has produced an immediate impact across the organization.”

VerticalNet said it plans to expand both organically and through acquisitions. “We continue to see a number of attractive merger and acquisition opportunities in the marketplace,” said chief operating officer Mike Hagan.