(Bloomberg) -- Priceline Group Inc. wrote down the value of its OpenTable restaurant-booking service by $941 million, more than a third of the $2.6 billion the online travel giant paid in cash to acquire it in 2014.
The writedown cut deep into third-quarter net income, which fell 57 percent to $506 million from a year earlier. Still, excluding the charge and some other items, Priceline beat analysts' profit estimates and shares rose 5 percent to $1,555.00 in post-market trading. OpenTable represents only around 2 percent of the company's total revenue, Interim Chief Executive Officer Jeffery Boyd said in an interview.
Third-quarter earnings were $31.18 a share, topping the average analyst estimate of $29.86, the company said in a statement. Revenue was $3.69 billion, compared with estimates of $3.62 billion. Gross travel bookings, the total amount of money spent by customers on Priceline's websites, increased 25 percent to $18.5 billion.
Priceline has used acquisitions like OpenTable and Kayak.com to become the world's largest online travel company by market value. OpenTable was Priceline's largest acquisition and let it push beyond a traditional focus on flight, hotel and car rental booking. Boyd, who was chairman of the board at the time of the acquisition, said Priceline realized it needed to re-align its expectations for how fast OpenTable could grow.
“We put a long-term financial model together at the time of the acquisition that called for very rapid expansion of the international business and other growth initiatives and a fairly quick return of the revenue associated with those investments,” Boyd said in an interview. “The move that we're announcing today is just a recognition that the best way to go about it is in a more measured pace.”
Boyd declined to say how much Priceline had been investing in the unit or how specifically the forecast for revenue growth was changing. Priceline doesn't break out OpenTable's financial results.
Beyond the charge, Priceline's results paint a positive picture of how the summer travel season went, with the number of rooms booked through its websites growing and concern over the impact of terrorist attacks on European tourism largely evaporating.
Priceline, based in Norwalk, Connecticut, forecast fourth-quarter earnings, excluding some items, of $12.20 to $12.80 a share, slightly below the average analyst estimate compiled by Bloomberg of $12.93.
To contact the reporter on this story: Gerrit De Vynck in Toronto at gdevynck@bloomberg.net. To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz, Andrew Pollack
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