The recent ascent of the US dollar and weakening of the Euro and Yen have far reaching consequences. For US companies that depend on foreign sales, the consequences can be harsh. Priceline's European assets get priced in US Dollars, making them worth less as the Euro falls. Further, the company's European customers have less money to spend. Sixty percent of Priceline's revenue is estimated to come from Europe.
Why Priceline’s problems may soon be tech’s problems
By KEVIN KELLEHER at Pando Daily
Excerpt:
Sometimes it seems like the tech industry is its own little world, comfortably insulated from the turmoil that might be happening in other parts of the global economy. That seemed the case back in 2009, when the streets of San Francisco seemed much more bustling with startup activity than anywhere else in the country.
Many of the startups that emerged during the course of the Great Recession have quickly grown to become successful business models that are pursuing expansion in Europe and Asia. In doing so, they are finding it harder to stay immune to the turmoil in other economies. Those facing this conundrum might keep an eye on Priceline, which has been getting hit by economic forces beyond its control.
[…]
….The primary reasons for Priceline’s lackluster performance have more to do with where it’s doing business, rather than how.
About 87 percent of Priceline’s revenue comes from international markets – with 60 percent alone estimated to be coming from Europe – but the company reports results in US dollars. The problem is that the dollar has been growing stronger against most major currencies as the EU and Japan have been pushing generous monetary policies that result in weaker currencies. As the company has noted in its SEC filings, “a weakening of the Euro decreases our Euro-denominated net assets, gross bookings, gross profit, operating expenses, and net income as expressed in US dollars.”
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