Galli leaving VerticalNet
January 06, 2001 11:13 AM PT
by Adam Feuerstein
Joe Galli is apparently saying
goodbye to the New Economy.
Galli, CEO of VerticalNet (VERT),
and the previous No. 2 executive at
Amazon.com (AMZN), is leaving
to take the top post at Newell
Rubbermaid (NWL), according to
a report in the Saturday online
edition of the Wall Street Journal.
A formal announcement of Galli's appointment as
president and CEO of the consumer products company
may come as early as Monday morning, the Journal
reports.
Galli only lasted five months at VerticalNet -- a company
struggled to find a successful niche in the
business-to-business Internet sector. He joined in July
after spending 13 wild months at Amazon as the
right-hand man to CEO Jeff Bezos.
Galli and other VerticalNet executives could not be
reached to comment.
What next?
His abrupt departure from VerticalNet will raise more
questions about the company's strategy and long-term
viability. In his short tenure, Galli has overseen a
significant restructuring of VerticalNet, which now must
find a new leader to follow through with his plans, or plot
an entirely new course.
Galli's exit will also pour gas on hot rumors that
VerticalNet is on the sale block. Just last week,
PurchasePro (PPRO), another b-to-b player, denied
market talk that it was in talks to acquire VerticalNet.
VerticalNet was founded as an operator of b-to-b
marketplaces focused on 58 industry sectors as varied
as solid waste, meat and poultry, chemicals and oil and
gas. But these online marketplaces have been slow to
take off, relying more on advertising revenue from
suppliers and less on actual e-commerce between
buyers and sellers.
At the same time, most of VerticalNet's revenue were
coming from NECX, a decidely offline brokerage of
parts and chips for the high-tech industry.
Last month, Galli unveiled a major shift in the company's
strategy, taking big steps to become a b-to-b software
company like Ariba (ARBA) or Commerce One
(CMRC). In short, VerticalNet was going to concentrate
less on operating b-to-b marketplaces, and more on
selling software and technology to build online
marketplaces for others.
Its first big customer was Converge, an
industry-sponsored marketplace for the electronics and
computer industry. Converge also purchased NECX.
Reaction to the new plan was mixed. Several analysts
downgraded the company, noting big challenges in
making the new strategy work. The downgrades pushed
VerticalNet's already-tumbling stock lower, which now
trades around $5 per share, 95 percent off its 52-week
high.
Most likely to succeed?
Who will succeed Galli? Mark Walsh, the company's
high-profile chairman, could take back the CEO post,
but that would seem unlikely. Walsh is a big fundraiser in
Democratic circles, known more for his energetic
speaking engagements and ties to Hollywood and
Washington, D.C., bigwigs than he is for running the
day-to-day operations of a struggling company. That's
why Galli was recruited in the first place.
And even though Al Gore's defeat leaves Walsh less to
do on the political front, it seems likely that he will try to
find another executive to run the company.
Another possible candidate could be Zev Laderman,
president and CEO of VerticalNet Solutions, the San
Francisco-based software arm of the company.
Laderman's stature within the company rose
significantly after Galli decided to turn VerticalNet into a
software company, but he is still a relative unknown.
Laderman sold his previous company, Tradeum, to
VerticalNet in March 2000.
Before that, he held several jobs at Oracle (ORCL).
Of course, Walsh and the VerticalNet board could tap
another executive from within the company's ranks, or
start a search for an outside candidate.
Sierra Cities left hanging
Galli's departure could also further hurt VerticalNet's
chances of acquiring SierraCities (BTOB)., a company
that provides loans and online financial services to small
businesses. VerticalNet has failed to gain the approval
of two-thirds of SierraCities shareholders necessary to
clinch the deal, mainly because of its sinking stock
price.
VerticalNet announced its intention to acquire
SierraCities in early November, but has been forced to
extend the tender offer twice already. The next
shareholder voting period ends Jan. 16, and Galli's exit
will no doubt add to the doubts of SierraCities
shareholders.
Of course, all this speculation might end up being moot
if VerticalNet is acquired by another b-to-b company. In
the next few days, potential suitors like i2
Technologies (ITWO), Ariba and Commerce One --
the usual suspects -- will be rounded up and given the
once-over by investors and b-to-b observers. It takes a
lot more than talk, however, to make a deal happen. |
