Once high-flying Priceline.com Thursday managed to meet lowered expectations for its third quarter with a net loss of $2 million, about one cent per share. The embattled company’s stock also gained a little traction Thursday, rising 10.6 percent from an open of $6.53 to a close of $6.84. But the company is far from out of the woods and plans to restructure its management and lay of 87 of its 535 employees.
Senior Executive Vice President and Chief Financial Officer Heidi Miller resigned and will be replaced by Bob Mylod, formerly Priceline’s senior vice president of finance. Jeff Boyd has been promoted to chief operating officer.
“We appreciate the contribution that Heidi has made, and respect her decision to pursue opportunities and apply her talents in a more established business environment,” said Daniel H. Schulman, Priceline’s president and chief executive officer.
In addition to laying off 87 employees, the company said it will implement a new compensation program designed to retain and motivate key employees. The program will consist primarily of equity-based compensation, as well as cash incentives and other compensation. Priceline said the program will result in an increase in non-cash and cash compensation expense in the fourth quarter 2000.
“While the effect of these changes will adversely impact fourth quarter results, we believe they are necessary and appropriate to position the company for long-term improvement of its operating results,” Schulman said.
The past month or so has been trying for the company. In late September sagging ticket sales forced the company to warn that its third quarter results would be below analysts’ expectations, sending its stock price into a dizzying 42 percent plummet. The stock had been trading above $100. It’s 52-week high was $104.25.
The nose-dive accelerated a few days later, when Connecticut Attorney General Richard Blumenthal initiated a probe into the Norwalk, Conn.-based company after he received more than 100 complaints from customers.
Further legal troubles surfaced shortly before Priceline
released its third quarter results Thursday. Mark Zimmerman, a shareholder, filed a derivative lawsuit in the Delaware Court of Chancery, alleging that the market had been misled by the company’s disclosures about growth prospects and risks. Zimmerman wants three of the company’s directors to return any profits made by allegedly using non-public information to trade $247 million in stock last summer. He has asked the court to place any profits made by the three “selling” directors in a constructive trust, and to award damages because of the “gross negligence” of all 10 directors.
In its results, Priceline reported a third quarter pro forma net loss of one cent per share, compared to a pro forma net lost of eight cents per share for the same period in 1999. Revenues during the period reached $341 million, a 124 percent increase over revenues of $152 million in the same period last year. The company also said it had positive operating cash flow for the quarter.
“While we are disappointed in our airline ticket sales revenue for the third quarter, we believe that the business made solid progress on several fronts,” said Daniel H. Schulman, Priceline’s president and chief executive officer. “Our total customer base grew to 8 million. Repeat usage also grew, with slightly more than half of all purchase offers coming from repeat customers.”
Recognizing a need to improve customer service, Schulman added, “Our number one priority is customer satisfaction and service. A strong customer savings proposition has fueled our growth and we are working on a comprehensive program to ensure that our customers are satisfied in all respects. We are in the process of rolling out a number of educational initiatives to more clearly demonstrate the Pricelin
e value proposition to customers. To that end, our product development, customer service and marketing teams are working on enhancements to our Web site, product delivery and processes to incorporate both consumer and third-party feedback. These teams are also looking at new ways to ensure that customer questions or issues are promptly and fairly addressed.”