Priceline Sacks CEO as Old Guard Returns
Under Schulman's watch since his appointment in January, priceline's stock was up fivefold in value to $5.30 on Monday. This is a far cry, however, from priceline's 52-week high of $59.62.
"Rick [Braddock] has been instrumental in building priceline.com and has helped define and guide the company's strategic decision through its turnaround efforts," Nick J. Nicholas Jr., a priceline director, said in a statement.
Braddock continues as chairman of the Norwalk, CT, company, which allows consumers to name their price for airline tickets, hotel rooms, car rentals, long-distance telephone calls, mortgages and new cars.
Jeffrey H. Boyd, chief operating officer at priceline, takes over Schulman's duties as president.
With Schulman's ouster, priceline joins a select club of Internet poster boys, such as Yahoo, buy.com and Webvan, whose CEOs recently quit when the going got rough.
Wall Street's reaction to Schulman's ouster was sanguine. Lauren Cooks Levitan, who follows priceline from San Francisco for investment bank Robertson Stephens, was okay with the changes.
"In our view, priceline's management team was top-heavy relative to its recent pared-down focus, and, as a result, the company took the appropriate steps to bring the size of the management team in line with priceline's business opportunity," Cooks Levitan said in a research note May 8.
Priceline did not give any reason for Schulman's sudden departure.
"I don't really have any additional comments beyond the press release," said Brian Ek, spokesman for priceline. "It was a board decision."
Cooks Levitan felt that the management changes reflect priceline's aim to trim its product offerings.
"We believe the consolidation of priceline's management team simply reflects another step in the company's ongoing efforts to reduce its name-your-price offerings from several services, to focus predominantly on travel," Cooks Levitan said.
"[Priceline] management indicated that recent positive trends and strong business momentum, as discussed in priceline's first-quarter earnings call held last week [May 1], remain in place," she said.
The change in CEO, therefore, was no reason for Robertson Stephens to change its ratings on priceline, she said.
"We do not perceive priceline's management shuffle as contributing positively or negatively to our investment thesis, and, as a result, we do not believe this announcement should affect decision making around the stock," Cooks Levitan said.
But some see a deeper malaise at priceline. Take, for instance, its customer retention score.
"Some of the numbers that I've seen is that customers who've tried it once were so disgusted with the experience that they never went back," said Laura Ries, president of focusing consultancy Ries & Ries, Roswell, GA.
"I mean, that's a huge problem," Ries pointed out. "People who try something like Amazon generally love it and keep going there. People at priceline were fed up."
Not that Amazon is picture perfect. The Seattle retailer also was accused of spreading itself thin, moving away from its staples of books and music. The company now is cutting back on its wireless effort under the Amazon Everywhere initiative.
And, according to one securities analyst, even Amazon is hemorrhaging customers as quickly as it gains them.
"[Prudential Securities] has become increasingly concerned that Amazon's customer base is turning out to be far less loyal than once assumed, and, as a result, may not be so valuable at all," Mark Rowen, the investment bank's analyst, said in a May 7 research note.
Amazon, he said, gained 3 million customers in the first quarter ending March but lost 2.3 million customers in the same three months.
Ries blames poor leadership for many of the woes faced by once high-flying Internet-only players.
"I think many of these companies who took these people, someone like [former Webvan CEO George] Sheehan who accepted this post in the high-flying days of the Internet, did not quite realize what they were getting into," Ries said.
"Plus, the business models were flawed," she said. "It really takes a strong marketing background to run these companies, because it's branding that's going to win in the end, not just a better site. It's certainly important, but is Amazon winning because its site is much better than Barnes & Noble's or because its branding is much better?"