MS to spin off Expedia in IPO
Goldman Sachs and Morgan Stanley Dean Witter will co-manage the offering.
Though Expedia will become a separate company, Microsoft (Nasdaq:MSFT) will remain as its majority owner and Expedia will continue to provide travel services on the Microsoft Network.
Expedia, which reported a loss of $29.5 million on sales of $13.8 million in fiscal 1998, provides a variety of online travel services for leisure and small-business travelers. It has localized versions of its site in the United Kingdom, Germany and Canada.
With more than seven million registered users in August, Expedia could prove to be a potent competitor for the likes of Priceline.com Inc. (Nasdaq:PCLN), Preview Travel Inc. (Nasdaq:PTVL) and Cheaptickets.com Inc.
Piece of the puzzle
Brad Chase, vice president of Microsoft's Consumer and Commerce Group, said the Expedia spinoff was part of larger strategy to nourish market segments -- in whatever way is appropriate.
"The question is how do we make these marketplaces blossom and integrate them into MSN," Chase said during a daylong briefing Thursday in Seattle in which the company outlined its evolving Internet and consumer strategies. "Are we going to do spinoffs in other marketplaces? Sure."
Chase noted, however, that spinoffs were but one option the company would deploy. Depending on the market, it would engage in partnerships, as it has done with Ford. Or it could take the form of equity investments, as it has done with WebMD.
Microsoft launched Expedia in October 1996.
Details of the IPO, including number of shares offered and the price range, will be announced later. For now, the company plans to trade under the ticker "EXPE" on the Nasdaq exchange.
In the year ended June 30, Expedia reported sales of $38.7 million and a loss of $19.6 million.
Microsoft shares were off 2 7/16 to 93 5/8 Thursday afternoon.
ZDNN's Pat Houston contributed to this report.