Selling at the Right Price

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

One company particularly savvy at partnering is Priceline (PCLN)
The company’s innovative “name your price” system has proved to be

Interestingly enough, the company had to preannounce its financials
they were much better than what analysts expected. The actual results
were definitely impressive. Revenues of $169.2
were up 11 percent from the prior quarter and 790 percent
from the same period a year ago (there were 982,000 new customers).
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
million. For 1999, the company had $52.5 million in losses. In
Priceline’s management believes that profitability will be achieved
by the
first half of 2001. What’s more, the company believes that it will
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

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.

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