Netflix 1.16 Million Customer Signups Miss Analyst Estimates

Netflix Inc., the world’s largest online video service, reported new customer signups that missed analysts’ projections, a shortfall that forces the company to cut its U.S. growth outlook for the year. The shares fell.

Netflix added 1.16 million U.S. streaming subscribers in the third quarter, the Los Gatos, California-based company said today in a statement on its website. Analysts predicted 1.43 million, the average of 10 estimates in a Bloomberg survey.

The company expects to add as many as 5.4 million new U.S. streaming customers for all of 2012, down from an earlier forecast of 7 million that analysts saw as unreachable. The company is counting on profitable domestic growth to fund its its global expansion. Chief Executive Reed Hastings began offering service in Scandinavia last week.

“Streaming growth is slowing to a crawl, while their DVD business is generating 90 percent of all profit -- and that’s declining super fast,” said Michael Pachter, an analyst at Wedbush Securities Inc. in Los Angeles who has an underperform rating on the stock.

With at least $5 billion in streaming content obligations, of which $2.1 billion is due in the next year, the company will have to rethink its strategy, Pachter said in an interview.

Netflix tumbled almost 19 percent to $55.58 in extended trading after the report. The stock added 0.5 percent to $68.22 at the close in New York and lost 1.5 percent this year.

Third-quarter net income fell 88 percent to $7.68 million, or 13 cents a share, from $62.5 million, or $1.16, a year earlier, as Netflix bore costs to pursue growth outside the U.S. Analysts had forecast profit of 5 cents, the average of 29 estimates compiled by Bloomberg.

Quarterly Sales

Sales for the quarter rose 10 percent to $905.1 million from $821.8 million a year earlier, beating the $904.9 million average of 29 analysts’ estimates. In July, Hastings had suggested competition for TV viewers with the summer Olympics might temper new U.S. signups.

This quarter, Netflix forecasts sales of $919 million to $943 million, shy of analysts’ projections of $943.5 million. The company said results may range from a loss of $13 million, or 23 cents a share, to a profit of $2 million, or 4 cents.

Netflix expects to add 1.3 million to 2 million new domestic streaming customers this quarter, bringing the total to as many as 27.1 million, according to the statement today.

Worldwide Customers

Worldwide, the company has 29.4 million streaming customers and 8.61 million on its mail-order DVD plans.

Netflix’s declining DVD business is becoming another barometer of its health, since it is the company’s most profitable business, with $131 million in income last quarter, and helps finance overseas growth. The number of users could drop by 760,000 this quarter, on top of 2.56 million lost so far this year, Netflix said.

The company predicts a profit of $117 million to $129 million for the DVD unit this quarter, along with a loss of $107 million to $119 million in the international streaming unit. Netflix forecasts a profit of $94 million to $102 million for domestic streaming.