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MS reveals red ink in Expedia IPO filing

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Microsoft yesterday re-filed its IPO for Expedia, hoping to cash in on the Internet stock craze. A 13.6 per cent stake, amounting to 5.2 million shares, will be offered, with the share price expected to be in the 10 to $12 range. This was not disclosed in the first SEC filing in September. Assuming an $11 initial price and the sale of all the shares offered (a safe assumption), the 38.2 million outstanding shares would give an implied market value of $420 million. The CEO is Richard Barton and the CFO Gregory Stanger. In baring its soul (an assumption here) with the SEC in the revised initial registration statement, Microsoft had to file some interesting information on the financial viability of Expedia, which should make potential investors think again before parting with their greenbacks - except that they won't. For the financial year ending 30 June, Expedia lost $20 million on revenue of only $38 million. Yes, it's a small, unprofitable business. For the last quarter, losses were $5 million on revenue of $15 million, which means that profitability is not going up, although the revenue is. This suggests that the jolly forces of competition are alive and well, with Travelocity and Preview Travel being significant contenders in the airline ticket part of the game. Of course, nearly all the action for online booking is in the USA, where people evidently do not mind spending more time online to find a bargain flight than it would take to go by bicycle. All ten of Expedia's top ten destinations are in the USA, and the inclusion of leisure destinations like Orlando and Las Vegas suggest that the likes of Expedia is for consumers spending as little of their own cash as possible. Good on them - but it doesn't make for a really big business. There are localised versions for Canada, The UK and Germany. The registration statement has not yet become effective, so there is not yet a prospectus. ®

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