Results Curb QXL Revival

[London, ENGLAND] Third quarter results for QXL ricardo plc,
announced Tuesday, have halted the European auctioneer’s recent
revival in the markets.

Having declined in value by 98 percent in 2000, QXL’s shares had
risen by a third during 2001, only to drop by a penny —
around 8 percent — on Tuesday’s news.

At first it looks good, with corporate spin showing gross
profit up by over 50 percent and a further drop in operating
expenses. But analysts very quickly noted that acquisition
costs had pushed QXL further into the red, with losses deepening
from US $37 million to US $59 million for the quarter ended
December 31.

As usual, Chief Executive Jim Rose declared the figures good,
whatever anyone else may think.

“Overall, we have had a good quarter, and we now have the
critical mass and scale across Europe to allow us to maintain
our focus and execute towards achieving profitability,” insisted
Rose.

He is certainly correct in saying that QXL has been active, having
completed its merger with Germany’s ricardo.de AG, as well as
signing strategic agreements with Compaq in Switzerland and the
Netherlands and with Granada in the U.K.

The number of items offered for auction by QXL increased from
7.4 million in the previous quarter to 8.8 million. Over the
same quarter in 1999 the increase looks much more spectacular
— representing a rise of 576 percent, much of it owing to
growth by acquisition.

QXL believes one of its keys to future profitability will be
the move to establishing a fee-paying membership base, a
process already begun in the U.K., Germany and Sweden. It
introduced listing fees in the U.K. in September 2000 and in
Germany in January this year.

The process of squeezing money out the loss-making business
is called “monetization of the member base” — a gradual
move that begins with charging “success fees” when someone
sells an item successfully, following by listing fees for
everyone at a later date.

Another bright spot in the QXL empire is the promising
activities of QXL.tv — which joined with Fox Sports Net
in broadcasting a live auction across the United States
on NFL This Morning. All the winning bids came from the
Internet.

Yet the biggest vote of confidence in QXL came recently
when Adam Singer, chief executive of U.K. cable giant
Telewest, joined the board in January 2001 as a non-executive
director. The move sent a strong signal to the market that
QXL was not about to fold completely, despite its head-spinning
decline.

By the end of 2000, QXL had US $54 million in readily available
cash, down from US $114 million at the end of March 2000.

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