Thursday, July 26, 2012

Netflix Q2 profit dips on rising license fees, more competition (NASDAQ:NFLX)

Video subscription provider Netflix, Inc.(NASDAQ:NFLX) on late Tuesday reported a 91 percent drop in net income in the second quarter, as rising license fees and growing competition squeezed margins, but still above analyst estimates.

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Netflix earned $6.2 million, or 11 cents per share, in the June quarter on revenues of $889 million, a rise of 13 percent from a year earlier.In the year-ago quarter the company had earned $68 million, or $1.26 per share. However its performance was a slight improvementfrom the first quarter when it had reported a loss of $4.6 milliondue to costs associated with expanding in the United Kingdom. Analysts had forecast earnings at 4 cents a share.

Netflix's stock fell $20.11 to $60.25 in Wednesday’s session and made multi year low of $59.20.

Netflix charges its subscribers just $8 a month for downloading unlimited content, though its acquisition costs have gone up with television and film studios demanding more money for using the rights to their content.The company was also hit by a sudden dip in subscribers, who were angered when the company raised its prices a year ago by 60 percent.

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In the June quarter the company added 420,000 subscribers in the U.S. compared to the 1.8 1.8 million U.S. subscribers it added in the year-ago quarter. Netflix has admitted that Summer Olympics in London, starting on Friday, could pose stiff competition to increasing its subscriber base.

The company stuck to its earlier predictions of posting a loss for the year, as it spends more in expanding into markets outside the U.S. The company posted a loss of $89 million from its overseas operations.

The company has also warned of continuing challenges ahead and asked investors to brace for “ups and downs” as it pioneered internet television.

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