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Travel website Kayak finally files for IPO

Competition fierce as Concord-based firm seeks investors

Kayak announced last month that it was expanding a relationship with Amadeus, a software company that provides pricing and availability Web searches for airline flights.

David Paul Morris/Bloomberg

Kayak announced last month that it was expanding a relationship with Amadeus, a software company that provides pricing and availability Web searches for airline flights.

The travel planning website Kayak Software Corp. embarked on its long-delayed trip to Wall Street Monday, nearly two years after it first filed plans for an initial public offering, and as it faces new competition from such Internet giants as Google Inc. and Microsoft Corp.

The eight-year-old company will price its shares at $22 to $25, according to a filing with the Securities and Exchange Commission, and could raise as much as $100.6 million in the offering, which is expected next week.

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On Monday, Kayak began its “road show,” a pre-offering series of presentations for potential investors. The company will trade on the Nasdaq market under the symbol KYAK.

The Internet travel market has become much more competitive since Kayak, which is based in Concord and Norwalk, Conn., first filed to go public in November 2010. Beyond sites like Expedia Inc., Orbitz, and TripAdvisor — the Newton travel review site that went public last year — Kayak is up against similar services from Google, Microsoft’s Bing Travel, and Web start-ups like Hipmunk Inc. of San Francisco.

“There is a constant amount of pressure on Kayak to continue to refine what it does and push itself on innovation,” said Henry Harteveldt, an online travel industry specialist with Atmosphere Research Group in San Francisco.

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Kayak acknowledged its growing challenges in a filing Monday with the Securities and Exchange Commission. “Large, established Internet search engines . . . are creating, and are expected to create further, inroads into online travel, both in the US and internationally,” the company said.

Perhaps the biggest challenge originated with Google’s 2010 purchase of ITA Software Inc., the Cambridge company that supplies Kayak and many other Web travel sites with their flight-search technology, Harteveldt said. The $700 million deal jump-started the launch in September of Google’s own online flight search product, and the company could eventually decide to stop supplying ITA technology to third parties. A Google spokesman declined to comment.

In reaction, Kayak said in June that it was expanding a relationship with Amadeus, a Spanish software company that provides pricing and availability Web searches for airline flights, and a potential replacement for ITA. “Kayak can not allow itself to have the future of its business dictated by any third-party provider,” Harteveldt said.

Amadeus did not respond to a request for comment. Kayak said it would not comment, citing the legally mandated “quiet period” prior to an IPO.

Yet even as its rivals grow, Kayak’s market is also expanding, as consumers spend more to book flights or reserve hotels on the Web. Kayak noted in its filing that nearly a third of the purchases made in the $910 billion global travel market are made on the Internet. In the United States, according to New York Web analytic company eMarketer Inc., online spending for travel will climb 11 percent this year to $119.2 billion.

Kayak earns most of its money through referral fees. Its users search for fares on its site, but actually purchase the tickets on partner sites such as Orbitz and Travelocity. It also makes money from advertising that appears on its website and mobile applications. The company reported revenue of $224.5 million in 2011, a 31 percent increase over the previous year. The number of user queries nearly doubled in three years to 898.5 million in 2011.

Kayak was on the verge of starting its market road show in May, but delayed at the last minute following the poor performance of the much-hyped initial public offering from social networking giant Facebook Inc. in May. Facebook initially priced its shares at $38, but the stock quickly fell and hit a low of $25 last month. Facebook shares closed at $32.17 on Monday, up 1.39 percent from the previous day.

In the past several weeks, however, the market has been receptive to several other technology offerings, according to Renaissance Capital, a Greenwich, Conn., IPO advisory firm. The firm said Monday that four companies that went public in the first week of June, including two from Massachusetts, have seen positive returns.

Two other companies set terms for initial public offerings on Monday. Guitar maker Fender Musical Instruments Corp. of Scottsdale, Ariz., set a price range of $13 to $15 to raise as much as $150 million when it begins trading. The Santa Clara, Calif., enterprise software company Palo Alto Networks will price its IPO shares between $34 and $37 to raise about $220 million.

Michael B. Farrell can be reached at michael.farrell@globe.com.
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