Restaurant booking company OpenTable expects costs to surge

Thu Feb 6, 2014 6:47pm EST

(Reuters) - OpenTable Inc OPEN.O, an online restaurant booking service provider, forecast a weaker-than-expected profit for the current quarter as it hires more employees and increases investment on marketing.

The company, whose shares fell as much as 10 percent in extended trading, said hiring-related costs would rise by about $8 million in 2014 due to its expansion in the UK, Germany and Japan.

OpenTable said marketing costs would also increase by about $9 million as it accelerates investments on online marketing.

"OPEN has been under-investing in marketing and technology for a number of years now and so this increased investment in many respects is a 'catch-up'," PAA Research analyst Bradley Safalow told Reuters.

The company's total costs for 2013 were $143.6 million.

OpenTable forecast an adjusted profit of 39-43 cents for the first quarter, way below the average analyst estimate of 54 cents, according to Thomson Reuters I/B/E/S.

The company said it expects revenue of $53.3-$54.9 million, compared with analysts' average estimate of $54.3 million.

OpenTable said it would buy a provider of mobile personalized restaurant recommendations, Ness Computing Inc, for about $17.2 million as part of efforts to boost revenue from mobiles devices.

Safalow said OpenTable's recent acquisitions of companies such as QuickCue, Ness, and Foodspotting are examples of underinvestment and that these are features that OpenTable should have developed in-house.

"In other words, growth is slowing and will continue to slow...", he said.

The company said the number of diners who used its services rose to 44 million in the fourth quarter.

Application downloads on smartphones, tablets, and other mobile computing devices will jump to 187 billion in 2017 from 87.8 billion in 2013, IDC forecast in June. (link.reuters.com/myg79t)

OpenTable said in November it was working on allowing patrons to pay for a meal via their mobile phones and that it planned to launch the service in San Francisco.

If a diner makes a reservation at a restaurant through the OpenTable website or its app, the restaurant gets charged $1 per diner. If a diner makes a reservation on the restaurant's website and is directed to the OpenTable system, the restaurant is charged only 25 cents per diner.

Net income rose to $10.3 million, or 43 cents per share, in the fourth quarter, from $7.5 million, or 32 cents per share, a year earlier.

Revenue rose about 22 percent to $52.3 million.

Excluding items, the company earned 59 cents per share.

Analysts on average had expected earnings 52 cents per share on revenue of $51.5 million.

OpenTable shares were down at $69.50 in extended-trading. They closed at $75.41 on the Nasdaq on Thursday.

(Reporting by Chandni Doulatramani in Bangalore; Editing by Sriraj Kalluvila and Don Sebastian)

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