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VerticalNet's new CEO brings lessons from Amazon

Tuesday, August 01, 2000

By Stephanie Franken, Post-Gazette Staff Writer

Joseph Galli's 71-year-old mother, Lucia, just embarked on her third career -- as an Internet day trader -- and his father, 72-year-old Joseph, still works seven days a week at the Westmoreland County auto wrecking business he founded in New Kensington 50 years ago.

So it should come as no surprise that the couple's son, formerly the No. 2 executive at Amazon.com, should do the unexpected.

He left the Internet retailer last week to become the top executive of a lesser-known company, Horsham, Pa.-based VerticalNet, a company that creates business-to-business Internet marketplaces.

Galli has walked away from Amazon as its honeymoon has ended in Wall Street's eyes. The online book and compact disc retailer continues to lose money and shows few signs of reversing this trend.

But Galli, 42, who was hired in June 1999 to tighten Amazon's belt and conduct the company's first layoffs, says he left Amazon for another reason entirely -- a pledge he made to his parents when he was a teen-ager.

They raised him with the assumption that he would inherit his father's business, Joseph Galli Auto Wreckers. But they also reared him "not to work but to go out and change the world," said Galli.

So early in life, he squelched their hopes that he would take over the family scrap yard. "At 15, I told them I was going to be CEO of a major company," he said, adding that his parents didn't take it well. "The month I told them was a bad month."

After a making a promise like that, Galli would not be satisfied with a No. 2 position -- not even at Amazon.com.

Now he has lived up to his word, signing on last week as chief executive officer of VerticalNet with an estimated pay package of $25 million. On Friday night, Galli flew home to Pittsburgh and stayed up until 4 a.m. with his parents, celebrating his new job.

He glows when talking about the elderly couple.

He credits them for giving him the drive that led to his early successes as a champion wrestler at the University of North Carolina as well the leadership skills that brought him to the helm of VerticalNet.

He also gushes about another major figure in his life, Amazon.com founder Jeff Bezos, calling him a "brilliant visionary" who remains a very close friend. "I would do anything for him," he said. "It was very painful to leave Amazon. Walking out the door was incredibly difficult."

But Galli, whose reputation as a hard-edged businessman precedes him, did just that, joining what he calls a "red hot" company that is positioned to become the Amazon.com of the business-to-business e-commerce world. "I'm going to pour gas on the fire and grow it as fast as I can," he said of his role at VerticalNet.

Indeed, the company, whose online marketplaces sell products ranging from $10 million machine presses to $8 hard hats, saw tremendous growth during the last quarter, with sales growing 1,400 percent to $53.6 million from the comparable year-ago quarter.

But, like most other B2B Net companies, it's still not profitable. And its stock is vulnerable to Wall Street's Internet whims, as witnessed last week, when VerticalNet shares plunged 15 percent on Wednesday, primarily because its sales still fell short of Wall Street expectations of $55 million for the quarter.

But Galli, claiming, "I like to run companies for sport," shows no trepidation and expects to guide VerticalNet through exponential growth the next eighteen months. Its expansion will be fueled in part through recent contracts with Microsoft and 3M, he said, and by his efforts to take its business abroad.

Galli said his background not only as president of Amazon.com but also as president of "bricks-and-mortar" company Black & Decker are an ideal fit for his new job, which requires an understanding of both traditional and e-business models.

"This was the best job in the country," Galli said, reveling in the notion that his first stint as a CEO fulfills a destiny he chose for himself as an adolescent. "My parents instilled in me the idea that I could do anything."



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