PurchasePro Slashes Workforce by 50 Percent

On the same day PurchasePro.com Inc. , an America Online, Inc., major small business partner, is announcing a 50 percent reduction in its workforce, The Washington Post is reporting AOL is launching an internal probe into the company’s accounting procedures with the Las Vegas-based PurchasePro.

At least two AOL employees have been put on administrative leave, including Eric Keller, a senior vice president of business affairs at the Internet division of AOL’s parent company, New York-based AOL Time Warner Inc. .

AOL owns a 5.7 percent stake in the suddenly troubled Las Vegas-based PurchasePro, which develops online trading environments for small- and mid-sized companies. The business-to-business firm buys online advertising from AOL and works with AOL to jointly develop small business software.

PurchasePro has been stumbling since the unexpected resignation of its co-founder, chairman and chief executive officer, Charles Johnson, several weeks ago. Johnson abruptly quit one day before the company said it would have to restate its first quarter earnings because of revenue-recognition problems. The company also missed the deadline for filing its 10Q financial documents.

Once the documents were filed, PurchasePro’s first quarter loss increased from $18 million (26 cents a share) to $33.47 million (49 cents a share). Revenues were reduced from $29.8 million to $16.03 million. In restating its first quarter revenue, PurchasePro delayed booking approximately $9 million in revenue from AOL to the second quarter.

While an AOL official declined to comment on the internal probe into its accounting relationship with PurchasePro, he did tell The Washington Post that “All revenues related to PurchasePro have been accounted for appropriately and accurately by AOL.”

Replacing Johnson as CEO is Richard Clemmer, who has reorganized senior management and slashed the workforce to about 300 employees.

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