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Priceline.com (NASDAQ:PCLN)
Priceline.com (NASDAQ: PCLN)
800 Connecticut Avenue
Norwalk 06854
Chairman and CEO: Richard Braddock
Revenues (FYE December 31, 1999): $482,410,000
Net loss (FYE December 31, 1999): $1,055,090,000
Market capitalization: $8.664 billion
Employees: 373 (12/99)
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BNH
6/1/2000
By: Kristine Hansen
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Priceline.com (NASDAQ: PCLN)
800 Connecticut Avenue
Norwalk 06854
Chairman and CEO: Richard Braddock
Revenues (FYE December 31, 1999): $482,410,000
Net loss (FYE December 31, 1999): $1,055,090,000
Market capitalization: $8.664 billion
Employees: 373 (12/99)
Old rules dictated that fledgling companies needed to wait and build their business before even attempting an initial public offering. The Internet has changed all that. Barely off the launch pad, new e-commerce companies are quick to go public - about 40 just last year.
Priceline.com has followed this same course. Formed in July 1997, the company opened for business less than a year later. Then, not to be held back by Old Economy strictures, it went public the next year, selling 10 million shares at $16 per share. Proceeds were over $140 million. A few months later the company completed another offering of another one million shares at $67 per share, more than four times the IPO price. Proceeds topped $62 million. Currently the stock is trading in the low to mid-$60s.
So, what is this priceline.com? The company developed a “demand collection system” on its Web site to receive customer requests for goods and services at a certain price, a brand the company calls “Name Your Own Price.” Through participating vendors, Priceline.com tries to find the requested item at the desired price. The customer guarantees by credit card and once the item is found within the specified time frame the customer gets what he wants at the price he wants while the seller earns incremental revenue.
To start with, Priceline.com offered airline tickets. Although a paltry 47 tickets were sold the first 24 hours of operation, results by 1999 had taken off. Within one 24-hour period the company sold 10,000 tickets and weekly sales soared as high as 70,000. The company's airline service includes such partners as Delta, American and United.
Priceline.com then leveraged its formula to sell other services. Hotel-room reservations in early 1999 averaged about 1,000 room-nights per week. By the end of 1999 that number had increased to 17,000 with room availability in 1,100 towns, cities and resorts throughout the 50 states. Even groceries were added through a license agreement with Priceline WebHouse Club by which consumers could name their price for groceries and then pick up the items themselves at participating stores.
Now you can even name your terms and get a mortgage through the company's Priceline Mortgage service, which expanded nationwide earlier this year. The company also recently signed with Alliance Capital Partners to have Alliance act as a broker or lender in connection with Priceline.com's residential mortgages.
Producta and services offered by the company also include new and rental automobiles. And looking for that new car may have just become easier. The customer can specify to Priceline.com the specifications desired for the car and the price willing to pay. Priceline.com does the looking. The company plans to expand its new car services to the national level this year.
Whether old rules or new rules, in business the bottom line still counts. What will differentiate the long-term winners in e-commerce will be strong brand recognition, customer retention and profitability.
The company reports that as of February, Priceline.com was fourth among e-commerce firms in brand awareness, by adults surveyed, behind AOL, Yahoo and Amazon.com. The company reported for first quarter 2000 an increase of 1.5 million in new customers, which resulted in a current total customer base of 5.3 million. It also had 830,000 repeat customers for the quarter.
Indications are that the company's bottom line is improving and in late April three analysts recommended a buy on these shares. For the first quarter ended March 31, 2000 the company recorded a net loss of $13.6 million (eight cents per diluted share), 20 percent less than last year's first quarter net loss of $17.1 million. Revenues for the quarter were recorded at $313.8 million - more than six times the $49.4 million for the 1999 first quarter. Revenues for the 1999 year were $482.4 million, during which the company posted a net loss of $1.06 billion ($7.90 per diluted share).
In its infancy, in e-commerce terms, Priceline.com needed a full year to develop and launch its airline-ticket service. Later, introducing the hotel service took six months. By 1999 introducing the new rental car service took just 90 days. The company says that it can now introduce more services annually than was possible in 1998.
The company has big plans for this year, too. It expects to introduce some business-to-business services sometime in 2000 and to add Name-Your-Own-Price vacation packages, cruises, long-distance telephone services, auto and life insurance as well as credit cards. Internationally, Priceline.com is planning to penetrate Asia and Australia/New Zealand, followed by Latin America and Europe.
– KH
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