Netflix shares soar after surprise profit

Wed Jan 23, 2013 6:06pm EST
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By Lisa Richwine

(Reuters) - Netflix Inc surprised Wall Street on Wednesday with a quarterly profit after the video subscription service added nearly 4 million customers in the United States and abroad, sending its shares 34 percent higher.

The dominant U.S. video rental company had warned three months ago that it expected a loss for the October to December period as it paid startup costs for an aggressive expansion into Scandinavia and other foreign markets.

Netflix beat that guidance by reporting $8 million in net income for the fourth quarter, or 13 cents per share. Revenue rose to $945 million. The company also forecast it will add 1.7 million members in the first three months of 2013, though it forecasts net income to be "relatively flat" due to declining profit from the DVD business and higher global operating costs.

Shares of the company surged 34 percent after Netflix released its results, reaching $138.14 in after-hours trading, after closing at $103.26.

"They did surprisingly well with subscriber growth and profitability," Lazard Capital Markets analyst Barton Crockett said. "It was a very good quarter."

Netflix said it added 2.1 million customers during the quarter to its U.S. streaming business, its largest segment, for a total of 27.2 million at the end of 2012.

In international markets, the company gained 1.8 million subscribers. The total Netflix subscriber base for Latin America, Canada and parts of Europe reached 6.1 million.

The holiday season was "particularly strong, driven by consumers buying new electronic devices, including tablets and smart TVs" that offer Netflix's service, CEO Reed Hastings and CFO David Wells said in a letter to investors.   Continued...

The headquarters of Netflix is shown in Los Gatos, California September 20, 2011. REUTERS/Robert Galbraith