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Earnings Roundup / Netflix

Subscriptions and profit grow

January 27, 2009|TIMES WIRE REPORTS

Netflix Inc.'s fourth-quarter profit climbed 45%, propelled by the widening appeal of its relatively inexpensive DVD rental and Internet streaming service during a budget-crimping recession.

The results, along with an optimistic forecast for the current quarter, drove Netflix shares up more than 7% in extended trading.

The Los Gatos, Calif., company added 718,000 customers in the final three months of 2008, more than doubling the growth envisioned by management. The surge left Netflix with just under 9.4 million customers through December, a 26% gain from 2007 that suggests more people are looking for ways to entertain themselves at home in the worst recession since the early 1980s.

Netflix, launched a decade ago, has emerged as an enticing option by offering subscription plans that charge $9 to $17 per month to rent DVDs through the mail and watch a more limited selection of other video over high-speed Internet connections.

The allure is becoming so strong that Netflix is spending substantially less to attract new customers. Netflix's cost per new subscriber averaged $26.67 in the quarter, a 23% drop from the same juncture in 2007.

Those factors helped Netflix earn $22.7 million, or 34 cents per share, in the fourth quarter. That compared with net income of $15.7 million, or 23 cents, for the same period in 2007.

Analysts, on average, had projected earnings of 34 cents per share, according to Thomson Reuters.

Revenue in the period climbed 19% to $360 million, about $6 million above analyst estimates.

Netflix believes it's still gaining momentum, even as the economy deteriorates. Management predicted it would attract 700,000 to 900,000 more subscribers during the current quarter, yielding earnings ranging from 25 cents to 33 cents per share on revenue of $387 million to $393 million.

The average analyst estimate for the first quarter had stood at 30 cents per share on revenue of $371.5 million.

Netflix shares surged $2.20, or 7.3%, in extended trading after finishing Monday's regular session at $30.15, down 29 cents.

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