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Netflix Falls as Second-Quarter Profit Outlook Misses Estimates

Netflix Profits Rise 88%
Netflix Inc., the mail-order and online movie-rental service, said its first-quarter profits rose to $60 million, or $1.11 per share, on subscriber growth. Photographer: Jin Lee/Bloomberg

April 25 (Bloomberg) -- Netflix Inc., the DVD and online film-rental service, fell in extended trading after its second-quarter profit forecast missed analysts’ predictions.

Net income will be $50 million to $62 million, or 93 cents to $1.15 a share, the company said today in a statement online. Netflix projects sales of as much as $798 million. Analysts were estimating profit of $1.18 a share on revenue of $767.5 million.

Netflix, based in Los Gatos, California, fell $12.22, or 4.9 percent, to $239.45 in extended trading after the results were out. The shares lost 55 cents to $251.67 at 4 p.m. New York time in Nasdaq Stock Market trading.

First-quarter net income grew to $60 million, or $1.11 a share, from $32 million, or 59 cents, a year earlier, according to the statement. Sales increased 46 percent to $719 million, beating analysts’ projections of $706.1 million.

The company signed up 3.59 million new users to reach 23.6 million worldwide after saying three months ago it could reach as many as 23.7 million by March. Chief Executive Officer Reed Hastings has said Netflix will support its online business by purchasing rights to additional films and TV shows.

Analysts predicted first-quarter profit of $1.07 the average of 24 analysts’ estimates in a Bloomberg survey.

The company is likely to focus its efforts the rest of the year on international expansion and fending off increasing competition from streaming services offered by Amazon.com Inc. and Hulu.com, George Askew, a Stifel Nicolaus & Co. analyst who has a “hold” rating on the stock, said in a research note to investors today.

“Hulu.com continues to gain traction, as the streaming service expects to top 1 million subscribers and generate over $500 million in revenue in 2011,” Askew wrote.

Netflix may reach almost 30 million subscribers by the end of year, and pass Time Warner Inc.’s HBO early next year, Scott Devitt, a Morgan Stanley analyst who has an “equal weight” rating on the stock, said in a research note.

(Netflix plans a conference call at 6 p.m. New York time. To listen, go to http://ir.netflix.com.)

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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