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Technology Stocks : Booking Holdings (formerly Priceline) -- Ignore unavailable to you. Want to Upgrade?

To: Victor Lazlo who wrote (2397)	8/6/2000 12:28:20 PM
From: ecommerceman	Read Replies (1) \| Respond to of 2743

Name Your Forecast for Priceline Today's NYTimes By KENNETH N. GILPIN ------------------------------------------------------------------------ Jay S. Walker didn't play Kevin Costner's dad in "Field of Dreams." But Mr. Walker, the founder of Priceline.com, knows all about "if you build it, they will come." Essentially, that is what he has been saying since he started Priceline. On Wall Street it's called a "demand collection system" that allows people to name their price for things like plane tickets and hotel rooms. But Mr. Walker has more building to do. Last week, he agreed to sell eight million of his Priceline shares to entities controlled by Paul G. Allen and John C. Malone. The proceeds of that sale, about $125 million after taxes, will be piled into Priceline's WebHouse Club, a cash-hungry affiliate. Investors have been questioning Priceline and other e-tailers since March. Last week, Mark J. Rowen, an analyst at Prudential Securities, talked about Priceline's prospects. Excerpts from the conversation follow: Q. Would you explain the Priceline.com business model? A. First, Priceline's model has to collect demand and then move it to one supplier or another to get repaid for the discounts they have gotten for consumers. If they get millions of customers, they can go to consumer products companies and say "reimburse us for these discounts." The model works best in industries that have low variable cost of production or inventory. An airline seat, for example, has a variable cost of around $15. But if the flight takes off and the seat is empty, the seat becomes worthless. Q. WebHouse Club sells groceries and gasoline. Do these products fit the model? A. In many product categories, grocery costs are extremely low, compared to the selling price. If a supplier can be convinced that Priceline is bringing them new customers, it is very attractive because they will make a large variable profit. Groceries could be their next blockbuster category, but it appears that getting the grocery suppliers to pay for the discounts is taking longer than we initially anticipated. As far as gasoline is concerned, there is clearly huge demand: they have had one million people sign up for the gas card. But in the long term, the variable cost of gasoline is high and there are not a lot of profits in the channel to pay for discounts between refiners and gas station owners, who don't make much money off gasoline. Gas station owners make it off other products. If owners sign on, they are hoping they will get a new customer to buy gas as well as a Coke or an oil change. That may work, but the jury is still out. Q. What about Priceline's other products, like home mortgages, new car sales and long-distance telephone service? A. I think it will be hard for them to make a lot of money in these areas, because in each of these products there are not big enough savings to pass on. The company is extremely bullish on long distance. But telephone service is increasingly less expensive and commoditized. That makes it hard for Priceline to get significant market share based on price alone. Still, this is a model that can work in just about every industry. When I first heard about groceries, I didn't think it would be particularly attractive. Yet once I got into it and understood the power of the model in that industry, I changed my mind. If the grocery business is successful for them, it can be a $25 billion business for them, maybe bigger. Also, it is clear they are going to roll this out internationally. Q. Is Priceline's e-tailing model anything like Amazon.com's? A. The models are completely different. Priceline's is more attractive, because they are using existing infrastructure and the Internet and technology to collect demand and direct traffic to certain retailers and suppliers, and selling to the highest bidder. Q. Doesn't their model make them less susceptible to problems in a downturn? A. The fact that companies like Priceline and eBay don't take physical possession of inventory and don't have to make large investments in fixed assets makes their models more attractive than Amazon's. Also, their core users, the real middle class of America, are not even online yet. Long term, that bodes very well for Priceline. In downturns, discounters are the retailers who fare better, because people want to save more money. In a recession, I think you will see Priceline do much better than many of the online and traditional retailers. Q. You cut your rating on the stock to "hold" from "strong buy," and lowered your price target to $40 from $100. Why? A. Part of the reason for the downgrade was that while the travel business, which is doing about $1 billion in revenues, is good, growth is starting to slow. I thought by the time growth in the travel segment started to slow, the grocery business would be there to take investors to the next level. But groceries are not ready for prime time yet.

To: Victor Lazlo who wrote (2397)	8/8/2000 12:04:56 AM
From: jef saunders	Respond to of 2743

> Jeff what makes you think the min price is fluid because the filling of the seats is dynamic. say on day x the airlines have y seats available and are willing to accept $150 for one of those seats. on day x+1, the airlines have y+3 seats available, and are willing to accept $145 for one of those seats. on day x+2, the airlines have y-10 seats available, and are willing to accept $180 for one of those seats. that's just one algorhithim. could be done many different ways. jeff