December 26, 2000, 9:55 AM

Stability: not a price that can be named

Priceline.com, one of the most recognizable online sellers, has been torpedoed from all sides during the past few months. And although the ship may not be doomed to sink, it is taking on water.

Connecticut Better Business Bureau revoked Priceline’s membership in September. The BBB will not cite specifics until the window for an appeal is closed. All online BBB members hold membership in their home states. If the dismissal stands in Connecticut, Priceline will be removed from the national BBB.

Also that month, Connecticut’s Attorney General Richard Blumenthal began investigating Priceline on the heels of more than 100 complaints to his office.

Then in early October, two of Priceline’s appendages were severed. WebHouse Club, which licensed Priceline’s business model and offered gasoline and groceries on Priceline.com, expects to halt business by year’s end. Perfect Yardsale, another Priceline licensee, also shut down. Priceline says neither of these closures will affect its services, which include airfare, car rental and hotel rooms.

All this activity has resulted in a freefall of the company’s stock. As high as $80 in March, Priceline shares were selling just below $10 in October. In late September, Priceline warned investors that third-quarter revenue, expected to be $360 million to $380 million, would come in at $345 million. The company said a drop in airline ticket sales caused revenue to fall.

“Priceline is in a real tough position now,” says Gomez Senior Analyst David Provost. “The environment is unforgiving.” Priceline’s problems stem from its practice of adding tax and fees, its sub-par customer service and its poor disclosure practices (such as with the taxes and fees), says Provost. Some of Priceline’s problems can be attributed to poor timing, such as investors’ waning confidence in pure-plays and increased fuel costs for air travel. “When all these things come together, you stand to get hurt,” he says.

But all is not lost, Provost says. “It’s within Priceline’s power to change all these things. It’s a question of whether they will.” Customer service and price disclosure practices could be fixed in less than three months, he says. However, realizing the benefit of those fixes will take longer.

There was a ray of sunshine that came with these dark clouds. The company received an additional $50 million from Saudi Prince Alwaleed in September. He had already invested $50 million in May.

Priceline reported that it will step up its focus on customer and supplier satisfaction by using its web site to gather feedback and more promptly respond to questions and concerns. The company did not release details of this plan until Nov. 2, after this publishing.

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