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NETFLIX REPORTS RECORD PROFITS; STOCK SINKS
Tuesday, April 22 2008
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Online movie renters Netflix reported spectacular results in its first quarter but quickly warned investors that they were not likely to last. The company reported profits of $13.4 million on revenue of $326 million, up a whopping 36 percent over the same quarter a year ago when it reported net income of $9.9 million on revenue of $305 million. Everything appeared to have gone right for the company. It was adding subscribers and spending less to acquire them. It ended the quarter with 8.2 million subscribers after adding 764,000 new ones. Nevertheless shares in the company plunged 13 percent as it forecast that its strong earnings performance would not likely last through the remainder of the year as it faced the prospect of consumer cutbacks in entertainment spending due to the recession and the costs it will incur preparing for online delivery of product while competing with the likes of Apple's iTunes Store and Microsoft's Xbox Live service. (In a related development Sony said that it was planning to launch a video service of its own that will allow users of its PlayStation 3 console to download movies and TV shows.) In a conference call with analysts Netflix CEO Reed Hastings also observed that the company will begin charging a "modest premium" for Blu-ray high-definition rentals "sometime this year."
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