|BUSINESSWEEK ONLINE : DECEMBER 11, 2000 ISSUE|
|BUSINESS WEEK E.BIZ -- PERSONALITIES
He Pours Gas on the Fire
Can Joe Galli's super-intensity turn VerticalNet into a raging Internet success?
Joseph Galli Jr. sure knows how to work a crowd. Back in 1992, he gathered the Black & Decker Corp. (BDK) sales team in Florida to launch the new line of DeWalt professional power tools. Dressed in a bright yellow DeWalt shirt, he roamed a hotel stage with his microphone, ticking off five vital customers who had agreed to carry the products: Home Depot (HD), Lowe's (LOW), HomeBase (HBI), Hardware Wholesalers, and Ace Hardware. That triggered a hearty round of applause. Then he listed a further five. More applause. And another five. He ultimately rattled off 110 customers-all from memory, recalls Charles M. Brown, a former Black & Decker executive who is now president of Aqua Glass Corp. ''By then,'' he says, ''it was a feeding frenzy.''
Galli's job these days is to stir up the same kind of frenzy at onetime Wall Street highflier VerticalNet Inc. (VERT) The 42-year-old Galli took over as chief executive officer at the Horsham (Pa.)-based company in July. His challenge is to find the right formula for VerticalNet, which runs online business communities for 57 industries, from auto manufacturing to water treatment. While he has never run a company before, Galli's boss figures he's the man for this job. ''VerticalNet needed additional gasoline poured on the fire,'' says Chairman Mark Walsh. ''And Joe is gasoline.''
Already, Galli is turning up the heat. He quickly reorganized the company into three divisions and set goals for each. First, he aims to boost e-commerce on VerticalNet's community Web sites, which provide news, job listings, and discussion forums for small and midsize companies. VerticalNet now relies on ads for nearly one quarter of its revenues. But Galli wants to boost transaction revenues by setting up more individual ''E-commerce Centers''--essentially cybershops --so participating companies can sell products and services online. Second, Galli is accelerating the move to the Web by VerticalNet's big electronic components exchange, which operates primarily by phone and old-fashioned electronic trading. And he is pushing to sell more e-store software to corporations to do business online.
Early results show improvement. Revenues hit $74 million last quarter, up 38% from the previous quarter. And the quarterly loss, excluding non-cash items such as amortization, shrank slightly, from $18.8 million to $17.7 million. According to Merrill Lynch & Co., fees from e-commerce transactions on the community sites jumped from nearly zilch a year ago to 12% of revenues.
Thanks to Galli's upbringing in blue-collar Pittsburgh, he has a natural affinity for the sort of basic industries that VerticalNet caters to--machine tools, sealants, adhesives, and the like. Galli grew up in a house overlooking his father's auto-salvage yard, where he spent summers working-- often hauling gasoline tanks or car batteries by hand. He's not afraid to get his mitts dirty. And he relishes the chance to help these underdogs. ''We will enable these companies, which maybe aren't large enough, or are intimidated by the Web, to move their businesses online,'' he vows.
How driven is this guy? When he was co-captain of the wrestling team at the University of North Carolina at Chapel Hill, he won more than 100 bouts. To make weight once, he ran 10 miles and then jumped rope for an hour by a steamy indoor pool. ''If you told him it couldn't be done, he'd say: 'Watch me,''' says his coach, William C. Lam. And when Galli lost, he was harder on himself than his opponents had been. His worst defeat: a 15-3 wipeout during the national wrestling championships in his senior year. ''He beat me like crazy,'' Galli says. ''While it was demoralizing, it was also motivating, because I knew I'd wrestled the best possible opponent.''
Galli will need the same kind of grit as he tries to whip VerticalNet into shape. He's got some breathing room. The company had $145 million in cash and equivalents at the end of the third quarter, and a sweetheart deal with software powerhouse Microsoft Corp. (MSFT) that will generate $170 million in revenue over three years. Microsoft will pay for storefronts in VerticalNet's online communities for one year for some 80,000 small and midsize companies. In exchange, VerticalNet will use Microsoft software to build out those sites.
Even with Microsoft on VerticalNet's side, the new CEO has a plenty of fixing to do. VerticalNet was a pioneer in establishing Web sites for specific industries. But after its stock hit a high in March of 148, the shares began a sickening slide to about 18 today. Investors are fretting over how quickly the company's e-commerce operations will take off in a cyberworld jammed with rival sites. Analyst Bruce D. Temkin of Forrester Research Inc. expects a shakeout in the next year and predicts that many of VerticalNet's communities will fail. Compounding the challenge is the company's concurrent move to bring its electronics exchange onto the Web and its efforts to expand its software business. ''The three pieces are very different,'' Temkins says of VerticalNet's operations, ''so that makes it tough to manage.''
Galli's no stranger to uphill battles. A 19-year Black & Decker veteran, he had watched the company lose ground in professional power tools for years. Galli was part of a team that came up with the DeWalt professional power-tool line. He's credited with innovative sales tactics, including ''swarm'' teams that demonstrated the products on construction sites. The result: DeWalt sales went from virtually zero in 1992 to $1.4 billion in 1999. Gary T. DiCamillo, chairman and CEO of Polaroid Corp. (PRD), who headed Black & Decker's power-tool business in the early 1990s, calls Galli ''the best sales and marketing executive who ever reported to me.''
But Galli's hard-charging nature had a dark side. Several former Black & Decker executives say he favored managers that had the same intense, high-energy style he did. In fact, Galli's troops were known as ''Joe-Boys.'' Huffy Corp. (HUF) CEO Don R. Graber, who worked at Black & Decker at the time, says Galli discouraged dissent. ''If you weren't a Joe-Boy, you were out,'' he says. For his part, Galli says he cared only about performance: ''It boiled down to results. People said I didn't like them because of style. And I said no, it was because you missed your numbers.''
In the end, Galli's ambition ended his career at Black & Decker. When he was just 35, he was made president of the North American power-tools business. Analysts say he was impatient to move into the top job, but Black & Decker CEO Nolan D. Archibald, who was only in his 50s, was in no hurry to leave. The two clashed. So in April, 1999, Galli left the company.
After a bizarre incident where he accepted and then reneged on a job offer from PepsiCo Inc. (PEP), Galli landed at Amazon.com (AMZN) as president under whirlwind CEO Jeffrey P. Bezos. He recruited seasoned managers to improve financial discipline. Still, like many other Net stocks pounded by impatient investors, Amazon's share price declined markedly during the 13 months Galli worked there. And while his departure raised questions about possible tensions between Bezos and Galli, he insists that isn't so. The two had ''healthy debates'' over new ventures, he says, and he left only because he was eager to run his own show.
VerticalNet seems like a better fit. Galli's roots are intertwined with the kind of companies he deals with--smallish outfits that back on to cloudy rivers or inhabit graceless industrial zones. He learned hard work from watching his father, Joseph Galli Sr., who still works six days a week at the salvage business. He also learned negotiating skills watching his father strike deals on selling parts and metal.
His parents pressed him to succeed. His mother, Lucille, who was hospitalized with an infection when he was just four, insisted the doctors let her out early after she detected her son was picking up the broken English spoken by her Italian immigrant in-laws. She often went over his lessons with him and, to this day, drops him an occassional e-mail if she comes across a word she likes, suggesting he add it to his vocabulary.
It was assumed Galli would one day run his father's business. Even as a high schooler, he cooked up plans to create a chain of salvage operations. But as a college freshman, he changed his mind and called up his father to say he wouldn't be following in his footsteps. Instead, upon graduating with a degree in business administration, he took a sales job at Black & Decker. ''I was raised to achieve, and I had to go out on my own,'' he says.
These days, Galli, who is divorced and remarried and has three children, spends most of his downtime at his 26-acre farm an hour and a half drive from Horsham. He's planning to take up fox hunting--although he acknowledges it's an odd choice for a guy from the Iron City. ''There's an elegance and pageantry that appeals to me,'' he explains. Galli loves to read history books and has pored through 10 volumes on Napoleon alone. He's fascinated with the rapport the emperor created with his troops. ''Obviously, he made some tremendous mistakes. All leaders have things you can learn from and things you learn not to do,'' Galli says. With Napoleon, his lesson is not to get a false sense of invincibility. That doesn't seem like much of a threat to Galli at VerticalNet.
By AMY BARRETT
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e.biz Contents for Dec. 11, 2000 issue
He Pours Gas on the Fire
RESUME: Joseph Galli Jr.
ONLINE ORIGINAL: Joe Galli's Blueprint for B2B Well-Being
E-Mail to Business Week Online