Netflix Stock Rebounds on Company's Revised Revenue Projection26 Feb, 2004 By: Erik Gruenwedel
Slumping shares of Netflix rebounded after the Los Gatos, Calif.-based online video rental service's president and CEO Reed Hastings told analysts the company was accelerating by one year to 2006 projected annual revenue of $1 billion.
“To do that, we have to get really big in DVD [rentals], and we have to get into downloading,” Hastings said.
He said the company, which ships 600,000 DVD rentals per day, is using the goal of penetrating 10 percent of the San Francisco Bay area market this year as a blueprint for the rest of the country.
“If we get to 20 percent, there won't be a Blockbuster open in the Bay area,” Hastings said.
Netflix is finalizing plans to offer movie downloads to its users in the form of a single subscription service by next year, a move that media analysts have expected for some time.
“We don't think there will be much consumer demand initially,” Hastings said. “It's better to enter the market early than late.”
Hastings downplayed pending rental services from Blockbuster and Wal-Mart, and instead voiced concern regarding scuttlebutt that Amazon.com might enter the market.“It's a competitor we take seriously,” he said. “Amazon knows what they are doing online.”
Hastings' comments came 48 hours after Netflix's stock tumbled almost 11 percent when the company said quarterly customer acquisition costs would exceed projections by $2 per customer.
Netflix said it expects its subscriber base to surpass 1.9 million by the end of the first quarter ending March 31 — nearly 200,000 new members more than expected.
Digital media analyst Phil Leigh of Inside Digital Media said the company probably felt there was an overreaction to the increased subscriber costs and wanted to come back touting its accelerated subscriber growth rate.
“‘We're satisfied where we stand,' is what they are trying to say,” Leigh said. “And I wouldn't really take issue with that.”
Last quarter, Netflix posted net income of $2.3 million on revenue of $80.2 million.