Thursday, February 19, 2009

Expedia -- Barry Diller's Schizophrenic Explanation

Expedia (EXPE) announced Q4 and annual numbers. It took them three to four paragraphs of apology before they laid the numbers on the table. Yep you guessed it. They lost money because of write downs of intangibles. Expedia, which is a Barry Diller company, is of course convinced that their brands are OK and according to the boss

"When we emerge from this downturn is anyone's guess, but what certainly is not a guess is Expedia's global leadership in travel and our conservative management, both of which will allow us to weather a downturn of almost any length and come out stronger than when this mess began."

Barry Diller has no clue when this one will become a winner. But let’s look at a few things that are going well according to the earnings release.

• Worldwide revenue from products and services other than hotel and air (primarily revenue from advertising and media, car rentals and destination services) increased 16% for the fourth quarter due primarily to increased advertising and media revenue.
• Advertising and media revenue increased 29% for the fourth quarter, accounting for a record 11% of worldwide revenue.
• Revenue increased 10% for the year, primarily driven by increased advertising and media revenue and worldwide merchant hotel revenue. North America revenue increased 8%, Europe revenue increased 14% (also 14% excluding the estimated impact of foreign exchange) and Other revenue increased 24%.

Today the stock was pummelled downward by about 10%. I am surprised that investors are surprised that worldwide travel is having some difficulties. Think about it. Fuel is expensive and if you think you are going to lose your job the vacation goes on hold. Duh!

There is a serious conflict here. In the context of difficult economic times, Expedia writes down asset values, a big time mogul pontificates and says problems are short term, but we do not know how long short term will be. (No SEC definitions here but Barry Diller is taking investors into his confidence) Investors bail and Barry Diller starts planning to acquire the company for less, much less. Think about it.