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Expedia exceeds estimates

Excluding special charges, the travel Web site operator earned $15 million, or 25 cents per share, in its fourth quarter.

Expedia beat its own raised expectations in the fourth quarter.

After market close Monday, the travel Web site operator reported a fiscal fourth-quarter loss of $4.4 million, or 9 cents per share. Excluding special charges, Expedia earned $15 million, or 25 cents per share. Earlier this month Expedia said it would earn 20 cents to 23 cents per share in the fourth quarter.

Shares of Expedia traded at $49.90 in after-hours activity on the Island ECN, following the release of quarterly results. Expedia fell $1.85 to $48.14 in Monday's regular trading ahead of the news.

First Call's survey of seven analysts produced a forecast calling for a profit of 20 cents per share. However, the actual consensus estimate is higher, because the First Call figure includes a prediction of 7 cents per share by Pacific Crest Securities analyst Steve Weinstein, who told that he simply didn't bother changing his original estimate after Expedia's quarterly preannouncement in July.

The average estimate of the other six brokerage firms is 22.5 cents per share.

Expedia sees earnings of $10 million to $12 million in the fiscal first quarter, which translates into 16 cents to 19 cents per share, based on the company's estimate of 64 million diluted shares for the period. The company predicted earnings of more than $50 million in fiscal 2002, or about 76 cents per share, based on a forecast of 66 million diluted shares by the fiscal year's end.

The First Call consensus was predicting Expedia profits of 14 cents per share in the first quarter and 70 cents per share for 2002.

Fourth-quarter revenue for Expedia increased 112 percent year-over-year to $78 million, up 37 percent from the third quarter.

The July preannouncement by Expedia removed most of the suspense from Monday's announcement. And last week one of Expedia's rivals, Travelocity, reported stronger-than-expected quarterly earnings.

Travel Web sites generally have thrived this year. Analysts have attributed the online success to airlines' aggressiveness in promoting leisure travel, as corporate business has declined with the economic downturn of the past several months.

Expedia's quarterly report comes just a couple of weeks after Microsoft said it would sell its Expedia holdings to USA Networks.

Although the average price per ticket has fallen for travel Web sites, the amount of total business has more than made up for it, analysts said.

"Certainly this was a quarter in which pricing for travel did come down overall," Expedia Chief Financial Officer Greg Stanger said. "And that's why you saw the number of transactions increase faster than gross bookings."

C.E. Unterberg Towbin analyst Bailey Dalton was especially impressed by Expedia's ability to spur merchant revenue, which comes from products sold directly by the company, as opposed to agent revenue, which is generated by deals in which Expedia is simply a middleman.

Expedia's merchant revenue increased 81 percent from the March quarter and 176 percent from the year-ago period.

"Those are phenomenal numbers," Dalton said.

Although airlines and hotels have their own Web sites--as well as their own online businesses such as Orbitz--they will keep working with Travelocity and Expedia because they are successful, Dalton said. "At the end of the day, the people who sell the most product are going to get the inventory," she said.