Priceline Teams with American Express on B2B Alliance
By Cindy Christ

Investors bid up shares of Priceline.com more than 10 percent during intraday trading Thursday, after the name-your-own-price Web site announced an alliance with American Express and a new Internet long distance subsidiary.

Norwalk, Conn.-based Priceline.com said it had entered a three-year, multimillion-dollar agreement with American Express Small Business Services to launch a new Web portal offering business-to-business services for small companies.

Under the deal, the financial services giant will be a site anchor, with its credit cards and lines of credit as preferred payment methods. In addition, Priceline.com will allow users to apply for American Express cards online.

In return, American Express will market the portal to its more than two million small business customers.

"We expect that this alliance will enable priceline.com to rapidly establish its B2B market position and ultimately offer a robust collection of valuable B2B services," Priceline.com President and CEO Daniel H. Schulman said in a statement.

The portal's first B2B service is an Internet protocol long distance plan, allowing businesses to buy time for calls in the United States and to Europe under Priceline's name-your-price model.

The company said that early tests of the service showed users could save up to 40 percent over traditional long distance plans. The service works for both wireline and wireless phones, and customers don't need a computer to make calls.

The new unit, called Priceline Long Distance, is supported by Net2Phone, Deltathree and ZeroPlus, whose Internet protocol telephony services account for the bulk of all Web-based calls made from the U.S. As part of the agreement, Priceline.com said it would receive "multimillion-dollar" participation fees from the three firms.

The company said all calls would be placed over managed networks instead of the Internet to avoid poor sound quality.

Separately, Priceline.com announced a similar Internet calling plan for consumers.

To use the service, buyers log-on to Priceline.com's Web site and set the price they're willing to pay per-minute for a block of calling time. Customers whose orders are accepted receive an email with the provider's name and access and personal identification numbers to complete the call.

Based on news of the alliance and new long distance unit, three brokerages issued bullish reports on Priceline.com Thursday.

US Bancorp Piper Jaffray analyst Gregory Konezny reiterated a "strong buy" rating with a 12-month price target of $100.

Donaldson Lufkin & Jenrette Securities' Jamie Kiggen also restated a "buy" recommendation, and Sara Farley at PaineWebber called the firm a "buy" with a $125 price objective.

After trading up to $41.81 intraday, shares in Priceline.com closed down in a late day sell-off, dropping $0.25, or 0.68 percent, to $36.25. American Express slid $1.13, or 2.3 percent, to $48.88.

Internet telephony providers involved in the deal all gained on the news.

Net2Phone rose $2.56, or 10.5 percent, to $27.06. Deltathree (DDDC) was up $0.09, or 1.5 percent, at $6.47. ZeroPlus (ZPLS) added $0.25, or 5.7 percent, to $4.63.