09 December 2006

Expedia's buyback

Good or bad?

Well its good for the stock and good for the stock sellers. HOWEVER Expedia has been delivering a steady stream of mediocre news for over 2 years now. So is everything OK in the Kingdom of Barry?

Dara and Co clearly have a lot to answer for after presiding over a lacklustre 2 years. The business has made a number of missteps. Specifically in the USA it has failed to keep up with the changing nature of a supply constrained marketplace. In International, failure to to tap into the LCC marketplace has stymied its attempts at a dominant position in Europe. Finally the technology platform roll out has been - frankly - bungled.

This has allowed traditional players in Europe like TUI and Thomas Cook enough breathing space to regroup and represent a credible set of alternatives. The powering ahead of Priceline and (again) First Choice has shown that others can be more nimble and execute better than EXP. Finally no real growth initiatives in a business that demands it have been shown during this time.

Therefore in my humble opinion - Stock Buybacks are always a symptom of deep rooted trouble. Expedia is buying time and using some of the cash pile - unwisely in my opinion. It shows that they have run out of reasonable ways to use the cash for the benefit of the business itself. Once the buy back is completed - then what will Expedia do? It had better be good.

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