Profits Coming at Priceline?

Much troubled Priceline.com reiterated financial guidance it gave in February
and said it still expects to achieve a pro forma operating profit in the
second quarter as revenues improve.


And the online travel business as a whole may be on the upswing, too.
Goldman, Sachs analysts said they see several data points that “lead us to
believe the (first) quarter will be strong for Priceline,
Expedia and Travelocity.


Priceline, the Connecticut-based name your-own-price e-commerce company,
issued a press release in advance of Goldman Sachs’ Second Annual Internet
New Media and E-Commerce Conference in Las Vegas, saying that it still
expects first quarter 2001 revenue to be approximately 15 percent to 20
percent above the previous quarter and that it expects a first quarter 2001
pro forma net loss per share of between five and seven cents.


For the second quarter, the company said it expects revenue to increase
approximately 10 to 15 percent over the first quarter and it still sees a pro
forma operating profit.


“We credit the recovery of our business momentum, in large part, to the
numerous improvements we’ve made in our products and in our customer
service,” said Daniel H. Schulman, Priceline.com’s president and CEO. “In
addition, based on progress to date in achieving administrative efficiencies,
we believe our pro forma net loss for the first quarter will come in at the
favorable end of the range we gave in February.”


Goldman, Sachs told clients in an advisory that although it thinks Priceline
has additional work to do, we believe it “has made progress in beginning
its brand restoration, improving the customer interface and (improving)
service. We believe that Priceline can demonstrate the viability of its
platform by focusing on these priorities and moving
one step at a time – achieve positive cash earnings per share in the second
quarter, solidify its market position (and) fund new initiatives from
operations in a traditional fashion.


The market was certainly smiling on the sanguine outlook; Priceline stock was
up almost 22 cents to $2.75 in early trading. Its 52-week low is $1.06.


Expedia meanwhile said it has reached an agreement with Northwest Airlines
and KLM Royal Dutch Airlines under which Expedia will continue to act as an
agent for those airlines without adding a surcharge to the published price of
airline tickets.


Northwest and KLM Airlines in March sent a
ripple through the online travel business
when they eliminated
commissions on online travel bookings.


Details of the new agreement were not disclosed. Expedia stock was trending
upward in the early going to $13.12. Travelocity stock also was rising in
early trading, up 25 cents to $15.06.


Goldman, Sachs, meanwhile, said that airlines in general have been reporting
revenue shortfalls due to a softening of business travel revenues, while
leisure demand has remained strong. Priceline could benefit since it sells
leisure coach fares exclusively and at a relative discount to published
fares. The majority of revenues at Travelocity and Expedia also are generated
by leisure travelers with the remainder by small businesses, GS said.

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