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Priceline Scores First Profitable Quarter

In a stunning turnaround earnings report, name-your-own-price e-commerce company Priceline.com reported its first-ever profitable quarter -- a second-quarter pro forma profit of 6 cents a share on record revenues of $364.8 million.

Wall Street analysts on average had expected pro forma profit of about 1 cent a share. Pro forma net income was $11.7 million. The revenue figures compared to revenues of $352.1 million in the second quarter 2000 and $269.7 million in the first quarter 2001.

After the earnings report came out, Priceline soared $1 in after-hours trading, to $9.88, after closing at $8.87.

Even on a fully diluted (GAAP) basis, Norwalk, Conn.-based Priceline.com reported net income for the second quarter of $2.8 million, or 1 cent per basic and diluted share, compared to a GAAP net loss a year earlier of $11.7 million, or 7 cents per basic and diluted share.

Priceline also improved its guidance for the third quarter, saying it expects to make a pro forma profit of 5 to 7 cents per share.

The company's cash balance at the end of the second quarter 2001 increased to $165.7 million, compared to $138.7 million at the end of same period a year ago and $142.6 million on March 31, 2001.

"The hard work of Priceline.com's employees in improving our products and service while making Priceline.com more efficient has paid off with a recovery in top line growth and Priceline.com's first profitable quarter," said Jeffery H. Boyd, president and chief operating officer.

During the quarter, Priceline sold a record 3 million units of travel products, including 1.4 million airline tickets, an increase of 11 percent over the second quarter 2000 and 34 percent over the first quarter 2001.

Hotel room nights sold increased 57 percent over both the second quarter 2000 and the first quarter 2001. Rental car days sold increased 115 percent and 52 percent over the same periods.

"Online travel appears to be one of the few sweet spots in e-commerce," Chairman Richard S. Braddock said. "Based on second quarter results and our performance in July, we are increasing the guidance we previously gave for the third quarter and now expect revenues to exceed third quarter 2000 revenues of $341 million. We also would expect pro forma net income to range from 5 cents to 7 cents per basic share."

Priceline, which in May replaced CEO Daniel H. Schulman with its chairman, Braddock, was up 38 cents a share or 4.48 percent at the close at $8.87. Braddock was the company's CEO from July 1998 to May 2000.

Priceline saw its share price plunge to as little as $1.06 after it ran into problems last fall. At one time it had traded at more than $100 a share.

The Priceline earnings follow on the heels of those from travel service rival Expedia Inc., which Monday reported second quarter pro forma profits of $15 million, or 25 cents a share, beating analysts consensus estimates by 5 cents. Those numbers compare to a loss of $13.1 million, or 30 cents a share, a year ago and no doubt will please USA Networks Inc., which is buying a 70 percent interest in Expedia from Microsoft.

Goldman Sachs, in an advisory to clients on Expedia, was bullish, headlining its research thusly: "Accelerating Growth, Margin Expansion, Raising Estimates - Sounds GOOD!!" GS raised its yearly estimate for Expedia to 72 cents a share, and $1.10 for 2002.