RealTime IT News

Priceline.com: Selling at the Right Price

With the Internet growing at breakneck speed, it is essential to partner with other companies. Speed-to-market often determines success or failure.

One company particularly savvy at partnering is Priceline (PCLN) . The company's innovative "name your price" system has proved to be extremely versatile.

Interestingly enough, the company had to preannounce its financials because they were much better than what analysts expected. The actual results were definitely impressive. Revenues of $169.2 million were up 11 percent from the prior quarter and 790 percent from the same period a year ago (there were 982,000 new customers). About 35 percent of purchases were from repeat customers, which was up from 21 percent in the first quarter of 1999.

Losses are narrowing. In the last quarter PCLN lost $10 million. For 1999, the company had $52.5 million in losses. In fact, Priceline's management believes that profitability will be achieved by the first half of 2001. What's more, the company believes that it will generate more than $1 billion in revenues this year.

Much of the company's business derives from travel services. In the latest quarter, the company sold 707,000 airline tickets. But what will continue to propel the growth towards profitability is the expansion into new marketplaces via partnerships.

An example is Priceline's partnership with First Alliance Bank. The service, which is called PricelineMortgage, allows customers to name their interest rates on mortgage loans. Once the customer gets the rate desired, it is locked-in and guaranteed by the lender. Launched in October, the service has received more than $3.5 billion in loan requests.

But perhaps the most interesting prospect for the company is the lucrative business-to-business space. This could dwarf anything the company has done so far.

Despite the many successes, the stock price has been lackluster. Investors probably fear the possibility of substantial selling in early February because of an expiration of a lock-up agreement that covers 100 million shares -- about 2/3 of the total outstanding shares and a potentially huge overhang relative to the stock's average daily volume of about 3.8 million shares. While there is certainly cause for concern, with the company growing so fast, I would not be surprised if many shareholders continue to hold onto their stock.