Priceline loss narrows

May 1, 2001: 6:41 p.m. ET

Online travel services provider edges estimates, eyes a profit in 2Q

NEW YORK (CNNfn) - Priceline.com on Tuesday reported a first-quarter operating loss that was narrower than expected and said it expects to report a profit in the second quarter.

The company, which offers an online reverse auction service through which customers can "name their own price" for products and services such as airline tickets and rental cars, said it lost $6.2 million, or 3 cents per share, in the quarter, compared with a loss of 4 cents per share during the same period last year.

The first-quarter loss was 2 cents narrower than the 5 cents-per-share loss analysts polled by earnings tracker First Call generally had expected.

At $269.7 million, Priceline's first-quarter revenue fell 14 percent from $313.8 million during the same quarter a year ago, and was shy of the $279.8 million analysts were looking for, according to the First Call survey.

The company's net loss for the quarter, which includes restructuring and special charges, was not immediately available in the company's earnings release.

In a teleconference with analysts, Bob Mylod, Priceline's chief financial officer, said the company's first-quarter net loss totaled $13.8 million, or 7 cents per share. That compares with a net loss of $13.6 million, or 8 cents per share, during the same quarter a year earlier.

Executives at Priceline in Norwalk, Conn., stressed the progress the company has made in comparison with the fourth quarter, which they admitted was one of the worst in the company's history.

"As all of you are aware, we were hit by a series of adverse events in the third quarter of last year that raised a number of issues concerning the value of Priceline's consumer proposition, the validity of our business model, the adequacy of our customer service and, within the context of an imploding e-commerce market, the company's ultimate viability," said Daniel H. Schulman, the company's president and chief executive.

Schulman said that these concerns affected revenue and contributed to a sharp fourth-quarter downturn.

"We addressed these concerns head on, with a specific focus on our travel business, as today it is the primary driver of our financial results," he said.

In addition to airline tickets and rental cars, Priceline offers items such as home financing, hotel rooms, new cars, and long-distance telephone service. But the company generates the bulk of its revenue from travel-related products, which its said represented more than 90 percent of total sales in the first quarter.

Priceline had ventured into online grocery and gasoline sales as well, but backed out of those businesses last year after they proved a drag on earnings.

The company said it sold a combined 2.1 million units of travel products, which consist of airline tickets, hotel room nights and rental car days in the first quarter. By comparison, Priceline sold 1.7 million units of travel products in the 4th quarter of 2000.

As have many of its counterparts, Priceline has implemented a range of cost-cutting measures, including cutting 34 percent of its staff and postponing expansion plans.

Mylod said those efforts have resulted in annual savings of roughly $65 million, which will play a large part in the company reaching operating profitability in the second quarter.

Excluding extraordinary charges, he said Priceline is aiming for an operating profit ranging between 1 cents and 2 cents per share in the second quarter on revenue that is expected to come in between 10 percent and 15 percent above the first quarter's level.

In the third quarter, Mylod said the company is expecting its operating profit will rise slightly to a range between 2 cents and 3 cents per share. The company in February had said it was aiming for an operating profit in the second quarter, but it did not provide a specific per-share target.

Stock gains in extended-hours trade
Shares of Priceline (PCLN: Research, Estimates) rose more than 35 percent to $6.59 on Nasdaq ahead of the earnings news, boosted in large part by an upgrade from Goldman Sachs. They rose another 71 cents to $7.30 in extended-hours trade.

The company's stock, which was one of the high-fliers prior to the downturn in the dot.com market, has fallen more than 92 percent over the past year from a high of $86.

Goldman analyst Anthony Noto changed his investment rating on Priceline's shares Tuesday to "market outperformer" from "market performer." He said management has "right-sized" the business, improved customer service and stabilized growth.


	Priceline pitch man William Shatner continues to sing the company's praises on radio. (Courtesy/WilliamShatner.com)

During the first quarter, the company said it continued to focus on its core businesses, particularly travel, including a new advertising campaign focused on travel products, which executives said will accelerate in the coming months as they seek to draw consumers back to the Priceline brand.

Priceline will spend roughly $150 million on advertising during each of the second and third quarters, Mylod said.

Earlier this year, Priceline dumped "Star Trek" star William Shatner as its celebrity spokesperson for television ads, opting instead for Sarah Jessica Parker, star of the HBO hit series "Sex and the City." Parker does voice-overs but does not actually appear in the ads.

Shatner's song-parody ads – in which he lampooned tunes such as the rap hit "Bust a Move" by Young MC and 60s classics such as "Lucy in the Sky with Diamonds" and "Age of Aquarius" – have been relegated to radio.