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Expedia expects 3Q profit
April 16, 2001: 11:02 a.m. ET

Online travel business says strength in merchant business aids results
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NEW YORK (CNNfn) - Online travel services provider Expedia Inc. said Monday it expects to report its first-ever quarterly operating profit, rather than the loss previously anticipated.

The Bellevue, Wash.-based company, which is majority owned by software maker Microsoft Corp., said it expects to report a fiscal third-quarter profit of $4 million, or 9 cents per share, excluding extraordinary charges and other one-time items.

Wall Street forecast a quarterly operating loss for the three months ended in March of 13 cents per share, according to the consensus of nine analysts surveyed by earnings tracker First Call. The estimates ranged between a profit of 9 cents per share and a loss of 15 cents per share.

Executives at Expedia in Bellevue, Wash., attributed the stronger-than-expected operating results in large part to the company's merchant business.

"Our decision in early 2000 to invest in building a robust merchant business and effectively merchandising merchant inventory has paid off more quickly than we anticipated," Richard Barton, Expedia's president and CEO, said in a statement.

Expedia said it expects to report revenue of roughly $110 million, which would be an increase of 88 percent over the same period a year earlier.

Accounting for non-cash items, including amortization of goodwill and intangibles from acquisitions and amortization of stock-based compensation, Expedia said it expects to report a fiscal third-quarter net loss of roughly $18 million, or 37 cents per share.

Barton said the launch of the company's searching and pricing technology platform in January better enabled it to cross-sell merchant inventory and offer low-cost deals to its customers.

Expedia also said strong seasonal travel-buying and travelers' continued rapid adoption of the Internet for booking travel attributed to the results as well. The company expects to report gross bookings of roughly $674 million for the quarter, up 68 percent from the year-earlier period.

The company said revenue growth in the quarter was strong across both merchant and agency businesses. Merchant revenue rose to about $67 million, nearly twice what it reported during the same period last year. Meanwhile, agency revenue rose to about $34 million, about 88 percent more than it reported a year earlier.

Expedia said its expects to report cash and cash equivalents as of March 31 of roughly $152 million, compared with $118 million on Dec. 31. The company projected interest income in the quarter of about $2 million.

The company said the increase in cash reflects the cash-flow nature of the merchant business, in which it collects payment from customers in advance of the time it pays suppliers.

Shares of Expedia (EXPE: up $1.33 to $19.00, Research, Estimates) rose sharply on the news. At the same time, shares of Microsoft (MSFT: down $1.34 to $60.84, Research, Estimates) fell amid a broader decline in the technology sector. graphic