Priceline.com, the loss-making US online auction site, announced that it would cut 16% of its workforce yesterday as the former stock market favourite lost a high-profile member of its executive team.

Chief financial officer Heidi Miller is to step down after less than a year. Her move from her post as financial chief at Citigroup, one of the world's largest banks, to the "name-your-price" website had been heralded as a sign that online companies had come of age.

This week an investor filed a lawsuit against three Priceline directors for allegedly using inside information to sell shares before the public knew the extent of the company's woes last summer. They are accused of profiting by up to $247m from the information.

The market value of Priceline has fallen more than 90% since its high of $104.25 in March. Fears over continued losses combined with weak demand for its air ticketing services prompted the decline.

The shares fell in after-hours trading yesterday to less than $7 as Priceline said sales would decline in the fourth quarter. It also announced an expected charge of about $9m related to a warrant agreement with Delta Airlines.

Priceline said cost cuts as well as new share option-based compensation would lead to a further restructuring charge. Some 87 members of the 535-strong staff are to be made redundant.

Priceline was founded four years ago by entrepreneur Jay Walker. Bob Mylod, a senior vice-president, is to succeed Ms Miller. Priceline has also appointed a new chief operating officer, Jeff Boyd.

Priceline, which is based in Connecticut, lost $2m in the third quarter, which was in line with analysts' reduced expectations; it lost $11.9m in the same period last year.