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Netflix Posts Profit, Gains Subscribers

California and the West

April 25, 2006|From Bloomberg News

Netflix Inc., the largest mail- order movie-rental service, posted a profit in the first quarter after attracting 687,000 additional subscribers.

Net income was $4.4 million, or 7 cents a share, contrasted with a net loss of $8.8 million, or 17 cents, a year earlier. Revenue jumped 47% to $224.1 million, Los Gatos, Calif.-based Netflix said Monday in a statement. The average estimate of 15 analysts surveyed by Thomson Financial was 6 cents.

Netflix ended the quarter with 4.87 million subscribers and said it might end the year with at least 6.3 million. The company is signing up new customers after increasing marketing and introducing a $9.99 plan that allows one rental at a time. It's also gaining as Blockbuster Inc., the world's biggest video chain, is closing stores and cutting marketing after a decision to end late fees hurt revenue.

"Netflix is light years ahead of Blockbuster," said Mario Cibelli, a money manager at Marathon Partners in New York, which owns Netflix shares. "Netflix has a lot of cash. Blockbuster is struggling."

Earnings were announced after the market close. Shares of Netflix rose to $32.85 after hours. Earlier, it gained 44 cents to $31.24.

Netflix in January reiterated its forecast for pretax income this year of as much as $60 million.

"This is a cheap service that works extremely well," Cibelli said. "Longer term, they have a pretty good shot at being a very big player at entertainment distribution."

Under Chief Executive Reed Hastings, Netflix is offering DVDs in a high-definition DVD format and may create its own movies. Last week, the company named two film industry executives to lead a push into the development of original movies and TV shows that would add to Netflix's catalog of 60,000 titles.

Netflix named Bahman Naraghi vice president and head of original content and Sanford Friedman vice president of product operations. Naraghi is a former chief operating officer of Intermedia Film, an independent movie production company whose credits include "Terminator 3." Friedman was head of worldwide operations at DreamWorks Entertainment.

Netflix lets customers order DVDs from a website, keep three at a time under the $17.99 plan and return them by mail. It doesn't charge late fees and offers free shipping. Blockbuster and Netflix each have lower-cost programs.

Profit at Netflix has risen in two of the last four quarters as the company added subscribers.

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