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Netflix profit rises 4% as new customers sign up

July 26, 2008|From the Associated Press

Netflix Inc.'s second-quarter profit crept up 4%, beating analyst expectations as the online DVD rental service signed up 168,000 new customers while spending less money to attract them to the service.

The company said Friday that it earned $26.6 million, or 42 cents a share, up from $25.6 million, or 37 cents, in the same quarter a year earlier. The average earnings estimate among analysts surveyed by Thomson Financial was 40 cents a share.

Revenue climbed 11% to $337.6 million to match analyst estimates.

Netflix shares gained $1.12, or 4.2%, to $27.85.

The Los Gatos, Calif.-based company ended June with 8.4 million subscribers and probably would have had even more if it had advertised its service as vigorously as it usually does. But management has decided to sacrifice some of its growth opportunities to ensure that it keeps Wall Street happy with higher profit, Netflix Chief Executive Reed Hastings said.

As a result, Netflix trimmed its marketing expenses by $5 million, or 11%, from the same time last year.

Despite the cutback and a slowing economy, Netflix had far more success luring new subscribers than last year when it lost 55,000 customers during the spring -- the only quarter that the company's service has shrunk during its nine-year history.

"We appear to be substantially unaffected by the negative economic climate," Hastings said.

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