Wednesday, May 07, 2008

Orbitz Business Model Crashes

Orbitz (OWW)announced net revenues are up 3% and international bookings rose by 41%. You would expect good news at the bottom line. The losses increased by 50%. Q1 loss came to $15 million. Steven Barnhart, CEO and president of Orbitz Worldwide said “that that the first quarter of 2008 would be a difficult comparison against a very strong 2007 first quarter,"Steven you lost $10 million dollars last year in Q1; that cannot be characterized as strong.

The press release leads with lots of hyperbole about enhancements to the web site that will be supported by an advertising campaign. Management is excited that both top line and bottom line results will be highly rewarding.

The credibility question becomes how will the web site changes be leveraged? They already have experienced an increase in international bookings by 41%. The results were increased losses. So the statement that increased functionality on the web site will shortly equal better results is somewhat suspicious.