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Priceline Posts 3Q Loss, Cuts Jobs

Name-your-price travel service Priceline.com, citing continuing difficulties with the air travel business and "impairment" of investments in offshore licensees, posted a somewhat surprising third quarter loss of $24.3 million, or 11 cents per share, and said it will lay off about 65 employees.

Norwalk, Conn.-based Priceline said its results include non-cash charges of $24.2 million relating to its offshore licensees in Europe and Asia.

On a pro forma basis, the company reported net income of $400,000 (effectively 0 cents per share) on revenues of $240 million. The results compare to a GAAP net loss of $3.6 million, or two-cents per share, on revenues of $302 million, for the same period a year ago.

Analysts polled by Thomson/First Call on average had expected earnings of about a penny a share on revenues of $261.9 million.

Chairman Richard Braddock in a conference call said the results were "disappointing" and added that the company is not forecasting progress in the air travel business. He said the job cuts would leave the company with about 300 employees.

The company said its results reflect "continued difficult conditions in the airline industry, which has been affected by heavy discounting of retail fares and weak results in September "attributable, in part, to lower levels of travel around the anniversary of Sept. 11."

Priceline said that it will reduce operating "through a repositioning of its non-travel businesses and a reduction in headcount."

One of the few bright spots is the company's hotel business.

"The third quarter 2002 was another strong quarter for Priceline.com's hotel service," said Jeffery H. Boyd, president and co-CEO. Priceline.com said its hotel booked offers grew 37 percent year over year, with sales of more than 1 million room nights.

Priceline cited what it called "increasing evidence" that the growth of published discounting on the Internet is doing more harm (by reducing yields) than good (in the form of lower distribution costs).

"However," Boyd said, "given the protracted nature of the airline industry's difficulties, we will continue to focus our resources on our hotel and vacation package businesses and on making discounted retail fares available to our customers through Lowestfare.com."

Priceline.com's telecommunications service will continue to offer long distance calling plans, but will no longer sell Name Your Own price calling minutes.

For its second quarter, Priceline had reported GAAP and pro forma net income of $6.3 million, or 3 cents per diluted share on revenue of $304.5 million.

And in the first quarter, helped out by hotel room sales, Priceline said it made 2 cents a share on a GAAP basis.

Boyd said that Priceline expects to report a loss of "break-even to two cents a share" for the fourth-quarter and would not make specific projections for 2003, although he predicted first quarter operating losses due to a large advertising campaign that is in the works.

Separately, Priceline and its discount travel affiliate, Lowestfare.com, signed a deal with wholesaler GOGO Worldwide Vacations as the supplier for a new line of vacation packages that the two Web sites will integrate into their own product offerings later this year. GOGO offers packages to more than 200 destinations on four continents.

Priceline launched a Name Your Own Price vacation service last May, using its own inventories of airline tickets and hotel rooms, and this deal will expand its lineup.