PurchasePro Files for Bankruptcy

Perfect Commerce set to pick up e-sourcing provider's assets, customers

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Las Vegas  September 18, 2002  e-Sourcing pioneer PurchasePro is calling it quits, filing for bankruptcy and agreeing to sell its assets to sourcing solution provider Perfect Commerce.

The online sourcing services provider, founded in 1996, has filed for Chapter 11 in its home state of Nevada and is seeking court approval for the sale of its assets to Palo Alto, Calif.-based Perfect, which looks set to absorb most of PurchasePro's staff and to incorporate PurchasePro's solutions into its own offerings.

Financial details of the deal were not disclosed. In a statement, Richard L. Clemmer, PurchasePro's president and CEO, said: "The cost of doing business as a public company has increased significantly over the past year. After reviewing many of the options available, as well as the opportunity presented by Perfect Commerce, PurchasePro concluded that the terms of the acquisition and subsequent filing were necessary to preserve the assets and values of the PurchasePro's business and to protect the interest of the company."

Clemmer pledged that current PurchasePro customers would experience no service disruptions.

PurchasePro's fortune's rose and fell with those of the online sourcing and reverse auction wave that swept over procurement in the 1999 and 2000, only to fade as the economy went south and the B2B marketplace went soft. In a research note titled "PurchasePro Has Gone Perfectly Bankrupt," technology consultancy AMR Research noted, "The tale of PurchasePro, its e-procurement and trading exchange franchise business, its meteoric climb and collapse, and its original flamboyant CEO Charles 'Junior' Johnson, are the stuff of B2B soap-opera legend."

Johnson left his CEO post at PurchasePro in May 2001 as the company struggled to reorganize in the face of the floundering online auction market and to regain credibility in the wake of what some perceived as Johnson-led PurchasePro's unorthodox sales promotion tactics. (See previous iSource article.)

Since then, like many other point solution providers, PurchasePro has had to ice skate uphill, investing in expanding functionality and ongoing operations while supporting lengthening sales cycles and uncertain interest in online sourcing. The company famously, and perhaps boldly, began running a series of television ads on financial news programs last year to promote its services, evidently without sufficient impact to keep its operations alive.

The company's shares have recently traded below $0.10, and on Tuesday PurchasePro said it had been notified by the NASDAQ that its stock faced delisting for failing to meet bid price requirements.

For its part, Perfect appears to be on a spending spree. In July, the company acquired defunct reverse auction provider MaterialNet, another victim of the bust in B2B. AMR believes that Perfect is seeking access to its acquisitions' customers to upsell them on its own Perfect Supply Manager e-sourcing solution. The consultancy estimated that Perfect got 20 to 30 customers out of its MaterialNet purchase and is set to take on a like number from PurchasePro.

Where does all this leave current PurchasePro customers? Perfect says it will continue to support the PurchasePro offering. "Working together, Perfect Commerce and PurchasePro personnel hired by Perfect Commerce intend to maintain complete continuity of service to PurchasePro's customers, who should expect no disruption in service and support," Perfect said in a statement.

AMR suggests that Perfect may sell off PurchasePro's e-procurement offering. "It is not Perfect's core competency, and AMR Research expects that it will eventually be spun out, perhaps to a franchise like eScout," the consultancy writes. Overall, AMR believes that Perfect may offer a viable option for companies that would like to start their e-sourcing efforts with the types of electronic requests for quote or information and bidding events that Perfect now offers.