DVD Rental Leader tops Forecasts with Earnings

July 25, 2008 4:21:20 PM PDT
Shares of Netflix are higher at midday after the DVD rental leader posted better-than-expected quarterly earnings. Profit in the second quarter rose 4 percent, as it signed up 168,000 new customers and spent less money to bring them aboard. The Los Gatos, California-based company says it earned 26.6 million dollars, or 42 cents per share. Analysts were looking for a gain of 40 cents.

The company ended June with 8.4 million subscribers, and probably would have had even more if it had advertised its service as vigorously as it usually does.

CEO Reed Hastings says Netflix decided to sacrifice some of its growth opportunities to keeps Wall Street happy with higher profits.

Netflix could afford to spend less on advertising because its biggest rival, Blockbuster, has been promoting its online rental service less aggressively during the past six months.

Some analysts believe that could change now that Blockbuster has abandoned a takeover bid for electronics retailer Circuit City and is preparing to expand its Internet presence with a pay-per-view online video service acquired last year from Movielink.

At midday, Netflix shares were up more than 2 percent.