Expedia has acknowledged that the company didn’t generate the revenues to offset the increased expenses as the company s

Expedia has acknowledged that the company didn’t generate the revenues to offset the increased expenses as the company shared its first quarter results.

Published: 11 May 2006

Expedia has acknowledged that the company didn’t generate the revenues to offset the increased expenses as the company shared its first quarter results.

“While we anticipated negative growth in the first half of 2006, our performance this quarter was far below those expectations,” said Barry Diller, Expedia, Inc. chairman and senior executive. “We increased costs in many sectors -- necessarily we believe for our long term growth -- but didn’t generate the revenues to offset the increased expenses. We believe little has changed fundamentally -- Expedia remains the largest and most profitable online travel agent in the world, and while 2006 is going to be a challenging year, we don’t think long-term shareholder value and returns are in question. With that in mind, our Board of Directors has authorised a buyback of up to 20 million shares of our common stock.”

The company’s net income fell by 51.5 percent to $23.3 million, or six cents per share, hindered by lower margins on domestic hotel bookings, higher airfare and lower revenue per plane ticket. The shares dropped $3.44, or 17 percent, to $16.35 in after-hours trading.

On an adjusted basis, Expedia said it earned $57 million, or 15 cents per share, compared with $93 million, or 27 cents per share, a year earlier. The company shared said its revenue increased by twi percent to $493.9 million, while its bookings increased by 14 percent.

“Needless to say we are disappointed with our financial performance this quarter, and we are focused on tactical actions -- including a shift of our marketing approach -- to drive improvement in our results for the balance of the year,” said Dara Khosrowshahi, Expedia, Inc.’s chief executive officer and president. “At the same time, we continue to make real strides in our integration, data warehouse and technology platform efforts, which we anticipate will yield the bulk of their benefit in 2007 and 2008.”

The company in January launched the branding campaign “Enjoy Your Trip”, which promised customers that if they booked travel on the site and found a better price online within 24 hours, it would refund the difference, plus a $50 travel voucher. Khosrowshahi, according to seattletimes.nwsource.com, said the marketing campaign increased awareness and improved traveler’s attitudes about Expedia, but didn’t draw enough shoppers to the site during the quarter. The company also experienced weaker-than-expected traffic from third-party channels, including MSN.comand its private-label business. The sites combined drove 30 percent less transaction volume during the first quarter in comparison a year ago.

“This is particularly painful as we enjoy less favorable economics under our new deal,” he told analysts.

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