Priceline set to go public next month despite heavy losses

Priceline.com is set to go public in March, but according to documents filed with the US Securities and Exchange Commission (SEC), the Internet start up bled red ink profusely during 1998.

The company has a similar business model to that of Amazon.com, which started life as an online bookstore and has broadened its business over the past two years to become a socalled "shopping portal".

In April 1998, Priceline started business with one offering - customers could go to its Web site or call its toll free number and "name their own price" for an airline ticket. Today they can do the same for cars, hotel rooms, mortgage rates and refinancing products.

But expanding its market has cost Priceline vast amounts of money. In its SEC filings, the company said it generated revenues of $35.2 million from April to December last year, but recorded operating losses of $90.7 million.

While approximately $30.4 million of its sales came from the airline ticket business, it actually generated nearly $400 million in ticket offers, indicating that it was able to fulfill less than 10 per cent of demand.

But any nagging doubts about the viability of Priceline?s business model have not stopped late stage venture capitalists pouring money into it. The company received an investment round of more than $55 million in December from a group of investors that included Paul Allen?s Vulcan Ventures investment house and a contribution from Jim Manzi, former chief executive of Lotus Development.

Priceline hopes to generate $115 million from its initial public offering, but said in its SEC filing: "We have not achieved profitability and expect to continue to incur losses for the foreseeable future. The principal causes of our losses are likely to continue to be significant brand development costs, marketing and promotion costs, and technology and systems development costs."

It added that it had spent $24.4 million on advertising to achieve brand awareness. Priceline focuses almost exclusively on radio advertising that includes the voice of actor, William Shatner, of Star Trek fame.