Lastminute.com burn rate raises bankruptcy fears

Lastminute.com could be heading towards bankruptcy despite today's third quarter results showing narrowed losses and a jump in subscribers.

Disregarding claims that the company will be profitable by 2003, analysts called today's results mediocre and told silicon.com that lastminute's cash reserve of £117m was in danger of drying up before it reached its profit target.

Robin Bloor, senior analyst at Bloor research, said the results were encouraging and proved lastminute.com was building traffic. But he warned the time had come for the company to turn traffic into sales.

"They're in a race now to get to a position where the company is pumping profit before the market gets disillusioned with them. The results indicate that they're probably meeting their objectives and on plan, but I'm still not convinced. They show no solid evidence that people are habitually using lastminute.com," he said.

Thomas Power, Founder of E-cademy was less optimistic about lastminute's ability to turn a profit in just three years. He said lastminute was an attractive takeover target for any high street travel agency and such a move would be their best survival option.

"There is value in the brand name and value in their network position and other travel companies are not doing this. Yahoo is the only one making money at this, all the others are R&D labs, but their value is that they were the first to do it," he said.

Martha Bennett, analyst with Giga research, forecast lastminute rapidly eating into their cash reserve as increasing competition in the market forced them to spend more on marketing and technology.

"A lot of airlines and hotels are setting up their own online services. Any differentiators lastminute used to have are disappearing. Their technology is not good enough to set them apart. While they need to cut costs they also need to keep up advertising and technology expenditure, even increase it. There are going to be problems," she said.