Priceline shares tumble on job cuts, CFO departure

The stock of the name-your-own-price e-tailer slides about 34 percent, a day after the company said it would lay off 87 workers and said its chief financial officer is leaving.

Stefanie Olsen Staff writer, CNET News
Stefanie Olsen covers technology and science.
Stefanie Olsen
3 min read
Shares of Priceline.com slid about 34 percent Friday, a day after the name-your-own-price e-tailer said it would lay off 87 employees and that its chief financial officer is leaving.

Priceline stock fell $2.33 to $4.52 in late morning trading on the Nasdaq.

The announcement came as the company reported that third-quarter losses narrowed, meeting analysts' expectations as airline ticket sales sagged.

The cutbacks represented about 16 percent of the company's work force of 535. Chief financial officer Heidi Miller will leave her post to pursue other interests, Priceline said. She will be replaced by former senior vice president Bob Mylod.

Miller joined Priceline in March after five years as the CFO of Citigroup. At the time, Priceline shares were trading at between $80 and $100.

The company posted a pro forma net loss of $2 million, or 1 cent per share, on revenues of $341 million. That number excludes some warrant charges, option-related taxes and a $189 million write-off of the company's warrants in WebHouse Club, a Priceline affiliate that closed its doors last month.

During the third quarter last year, Priceline posted a pro forma net loss of $12 million, or 8 cents per share, on revenues of $152 million. Analysts expected Priceline to post 1 cent per share pro forma loss during the third quarter of this year, according to a survey by First Call/Thomson Financial.

At the end of the regular trading session Thursday, Priceline shares were up 66 cents, or almost 11 percent, to $6.84. In after-hours trading, Priceline shares fell to $5.19.

Priceline chief executive Daniel Schulman attributed the losses to sagging airline ticket sales.

"While we are disappointed in our airline ticket sales revenue for the third quarter, we believe that the business made solid progress on several fronts," Schulman said in a statement.

The Norwalk, Conn., company boasted that growth in its non-airline ticket businesses, such as hotel and car rentals, made up 19 percent of the business in the third quarter, compared with 12 percent a year ago. In addition, Priceline showed positive operating cash flow for the second quarter in a row.

However, the company expects revenues to decrease in the fourth quarter. "While demand for tickets has stabilized over the last few weeks, given seasonal factors, we expect revenues to decrease sequentially in the fourth quarter," Schulman said.

The company expects fourth-quarter earnings to be weakened as a result of its restructuring costs, increased competition and adverse publicity in recent months. The company also attributed the negative expectations to higher airline fuel surcharges that caused margins to decrease.

The company has amended the terms of the warrants held by Delta Air Lines, a Priceline investor and partner, and will take a noncash charge of about $9 million in the fourth quarter. Priceline also reduced the number of shares underlying the warrant to 4.675 million shares from 5.5 million shares and reduced the strike price.

Priceline, which allows consumers to name their own price for goods and services including airline tickets, hotel rooms and cars, also promoted executive vice president Jeff Boyd to chief operating officer.

The company has faced numerous challenges to its business in recent months.

Last month, Priceline ceased operations at WebHouse Club, a grocery and gasoline subsidiary, after it suffered continuing losses. The Greenwich, Conn.-based affiliate tied the closure to its inability to raise capital to complete its business plan and achieve profitability.

The news caused Priceline shares to hit a new low, dropping nearly 36 percent.

In addition, the company has faced increased competition in the airline ticketing business, which accounts for 85 percent of its revenue. Travel sites Orbitz and Hotwire, a site backed by a consortium of six major airlines, have entered the fray.

Shares of Priceline are down more than 85 percent this year from a high of $104.25. In October, several financial institutions including Credit Suisse First Boston and A.G. Edwards downgraded the stock to "hold."

Despite Priceline's troubles in the United States, it is expanding overseas.

Last month, the company launched a Web site in the United Kingdom selling only airline tickets, with plans to expand into other services and other European countries.