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Priceline.com cuts staff, postpones new services

The "name your price" site cuts 48 employees as part of a corporate restructuring and cancels the introduction of new business plans.

3 min read
In the latest blow to the beleaguered e-commerce site, Priceline.com on Thursday announced it has laid off 48 employees and will postpone the introduction of new services.

In addition, Norwalk, Conn.-based Priceline said that it has abandoned talks with Softbank to create a Priceline affiliate in Japan.

The layoffs represent 11 percent of Priceline's current staff.

As part of a corporate restructuring, the "name your price" e-commerce company said that it would indefinitely postpone the introduction of several new business ideas, including a business-to-business service and the sale of life insurance through its site.

"We stated that we would review new businesses under strict financial criteria. As a result of those reviews, we are re-focusing all of our efforts on achieving profitability with our core businesses," Daniel H. Schulman, Priceline's chief executive, said in a statement.

The company said it would recognize restructuring costs in its fourth fiscal quarter. Company representatives did not immediately return calls seeking comment.

The layoffs are only the latest setback for Priceline. The company recently laid off 87 employees--16 percent of its staff--and four key executives have resigned, including chief financial officer Heidi Millerand and Maryann Keller, the head of Priceline's automotive services business.

The company, which has been hit with at least two class-action suits in recent months concerning its financial performance, warned in September that third-quarter revenue would not meet analysts' expectations.

In October, Priceline affiliates WebHouse Club and Perfect YardSale ceased operations. The affiliate agreements were attempts to expand Priceline's "name your price" model into non-travel areas.

The state of Connecticut is investigating whether Priceline founder Jay Walker violated state labor laws when he laid off 100 workers at his Walker Digital think tank last month.

Priceline closed at $1.88 on Thursday, a gain of 9 cents. The stock is now trading 98 percent off its 52-week high.

A growing number of companies have cut their staffs in recent days. Earlier Thursday, NorthPoint Communications announced that it had cut 19 percent of its work force, and Internet consulting company Viant announced that it planned to slash nearly 20 percent of its staff.

Employees of e-business companies have been hit especially hard by the recent layoffs. In addition to Viant, Scient, Exp.com, Xpedior, Greenlight and DoubleClick have all cut their work forces in the last week.

The layoffs at Priceline were effective today, company spokesman Brian Ek said. Priceline gave affected employees a severance package, he said. Ek declined to say whether the company expects any future job cuts.

The layoffs and restructuring are part of an effort to cut costs and move Priceline toward profitability, he said.

In the last 18 months, Priceline has opened a site serving the United Kindom, launched an Internet yard sale, a long-distance phone service, a new car sales service and announced plans to offer car insurance. Additionally, Priceline licensed its service to WebHouse Club, which opened "name your price" gasoline and grocery services.

Although Priceline was attempting to expand its business model beyond its core travel services, the company still depends overwhelmingly on the sale of airline tickets, sales of which comprise 81 percent of its revenues. Despite its expansion, when airline tickets slowed in the third quarter, Priceline's revenues took a big hit, coming in $20 to $40 million below analysts' original expectations.

Despite this, Ek said that Priceline would continue to focus on its travel business, adding features to improve the service. The expansion "stretched (Priceline's) manpower and capital resources," he said, adding that Priceline is determined to turn a profit, even if it means curtailing that expansion.

"The market wants profitability sooner rather than later," he said. "We're making the necessary adjustments to build a profitable business.

Last year Schulman projected that Priceline would break even in 2001. But Ek declined to say when Priceline expects to turn a profit.

"We're not going to project that at this time," he said. "What we're going to do right now is just go out and deliver."