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Cendant: Travel Svce Unit to Weigh on Earnings

By Reuters
Published | Updated

CHICAGO – Cendant Corp. (CD) Tuesday said challenges at its travel services division would push fourth-quarter earnings to the bottom of the range it forecast in October, sending its shares down 9 percent.

The travel, lodging and real estate company, which owns online travel agency Orbitz and the Century 21 real estate brand, said weakness in bookings at its international travel services division led to the earnings warning.

Cendant also said it had removed Samuel Katz as chief executive of the Travel Distribution Services division and was seeking a replacement.

"Let's be clear: TDS is not melting down," Cendant Chief Executive Henry Silverman said on a conference call with analysts. "This is a case of failure against our projected growth targets. Of course, we regard this as unacceptable."

He added that the problem could be solved.

The company forecast fourth-quarter earnings of 23 cents a share. In October, it cut its forecast by 3 cents to 4 cents a share, to a range of 23 cents to 26 cents.

A key component of Cendant's international travel service division is Ebookers, which operates Europe's No. 2 travel Web site. A shortfall in bookings at Ebookers was partly responsible for the new forecast, the company said.

Cendant said its previously announced plan to split into four independent, publicly traded companies remained on track and that first-quarter earnings from continuing operations, before separation costs, would be 18 cents to 20 cents per share.

In October, the company said it would split into four separate companies: car rentals, real estate, hotels and online travel services. The travel services division was expected to become an independent company next October.

As Katz steps aside, Cendant's chief financial officer, Ronald Nelson, will become interim CEO of the travel services division.

Cendant also said plans for Silverman to become CEO of the travel business had changed. Instead, he will lead the real estate services company.

Shares of Cendant were down $1.64 at $16.74 on the New York Stock Exchange.