Netflix shares fall after slow growth forecast

April 23, 2012

Netflix shares slid more than16 percent in after-hours trading after the company announced that could face a quarterly loss and was expecting slower growth in its second quarter.

The streaming video service, which has had a tumultuous year, said that domestic revenue had fallen to $826 million from $847 million in the previous quarter. Global revenue fell, as well, to $870 million from $876 million. It expects to see anywhere from a $6 million loss to an $8 million in profit, according to a company filing.

The leading video subscription service has struggled to regain the good graces of customers who were turned off by its plan to spin off its DVD business — a strategy the company reversed within a month.

Despite the hit to its reputation, the company still added 1.7 million customers to its domestic subscriber base overall, reaching a total of 23.4 million streaming users. Internationally, Netflix added 1.2 million subscriptions.

Some of Netflix’s losses can be attributed to its aggressive overseas expansion, particularly into Latin America and Britain. In a letter to investors, Netflix chief executive Reed Hastings and chief financial officer David Wells said that the company expects it to take more than eight quarters for Netflix to become well recognized and popular in these new markets.

In the second quarter, the company said it expects the number of DVD customers to dwindle to as few as 8.95 million and that the total number of users in the United States could reach 24.2 million.

Hastings and Wells touted Netflix’s original programming and partnerships with Apple TV and Facebook as signs that the company is on the right track.

The executives also called out Comcast for the cable company’s decision to impose its data caps on apps such as Netflix, Hulu and HBO Go on the Xbox, but not to its own Comcast Xfinity App. Hastings had publicly criticized Comcast’s policy last week, saying that it violates the principle of net neutrality.

“Comcast could raise the cap and make it apply equally or just eliminate the caps. Net neutrality principles mean a level playing field for all Internet applications,” the letter read.

Related stories:

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Netflix’s Reed Hastings takes a swing at Comcast in the name of net neutrality

Hayley Tsukayama covers consumer technology for The Washington Post.
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