Ahead of the Bell: Netflix likely to post 4Q loss

Ahead of the bell: Netflix's 4th-quarter customer gains likely to overshadow anticipated loss

Associated Press

SAN FRANCISCO (AP) -- Netflix Inc. is expected to report it ended last year with another quarterly loss as its Internet video subscription service poured more money into an international expansion and licensing fees.

The fourth-quarter breakdown, due out after the stock market closes Wednesday, will also update how many more subscribers that Netflix during the final three months of 2012.

As long as Netflix's loss is in line with analyst projections, investors are more likely to pay more attention to the company's U.S. subscriber growth because those customers still bring in most of the revenue.

In October, Netflix predicted its service that streams video over high-speed Internet connections would add 1.3 million to 2 million subscribers during the fourth quarter while its fading DVD-by-mail option would lose as many as 750,000 customers.

If Netflix hits the top end of its growth goal, it will end the quarter with 27.1 million U.S. subscribers who pay $8 per month for the video-streaming service.

The company, which is based in Los Gatos, Calif., can't afford a letdown if it hopes to extend the recent momentum that has lifted its stock price by nearly 30 percent since early December. The shares closed Tuesday at $97.81, well below their peak of nearly $305 reached in July 2011 around the same time that Netflix incensed subscribers with a change that raised its U.S. prices by as much as 60 percent for customers who wanted both the streaming and DVD services.

If the fourth-quarter results disappoint, the stock will likely backtrack and that could agitate billionaire investor Carl Icahn, who owns a 10 percent stake in Netflix.

Icahn so far has publicly said he is pleased with Netflix's current management led by CEO Reed Hastings, but he has a history of rebelling against companies with sinking stocks.

The company has warned it may lose as much as 23 cents per share in the fourth quarter. The setback stems from the costs of an international expansion that expanded Netflix into four Nordic countries during the fourth quarter and the bills that the company has accumulated while licensing more movies and television shows for its video-streaming library.

If the fourth-quarter setback exceeds $9.3 million, or 16 cents per share, Netflix will register its first annual loss in a decade.

When it made its fourth-quarter forecast in October, Netflix said it might be able to eke out a profit of as much as 4 cents per share if its expenses turned out to be lower than anticipated.

Analysts, on average, expect Netflix to report a fourth-quarter loss of 12 cents per share on revenue of $935 million, according to a FactSet survey.

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