Priceline Blames Slow Airline Sales For Shortcomings, But Is That All?



Priceline.com Inc. on Wednesday joined a growing chorus of tech companies warning of quarterly revenue that will fall short of expectations--in Priceline's case, by $20 million to $40 million. The veteran online retailer blamed slow airline sales.

Analysts had expected the name-your-price retailer to report revenue of $360 million to $380 million when it releases its third-quarter results in November, but Priceline says revenue will be more like $340 million. Though these figures still show growth over last year's third quarter ($152 million), investors hit the panic button. Priceline's stock plunged $7.86, to $10.75 at the end of trading Wednesday.

Company CEO Daniel Shulman attributed the shortfall to the fact that direct-sale airline promotions and fuel surcharges kept people from buying tickets from his site. That particularly hurt in September, historically Priceline's strongest month for airline-ticket sales.

While David Provost, senior analyst with Gomez Advisors, agrees with that assessment, he says the company's problems may run deeper. According to Provost, Priceline's added fees and less-than-adequate service have turned off potential customers. "You don't get the price you expect, and then when you want to call up to complain or with a question, you're not being adequately served," he says. But, Provost says, this is just a glitch that by no means indicates a long-term failure for Priceline. "This is early in the game, and the future is very bright."

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