Offering products to the consumer electronics marketplace is an exercise in financial gymnastics. If a company isn’t prepared for the change that WILL come, they are most likely doomed for oblivion. Keeping pace with new and innovative ideas that can be brought to market on that proverbial dime is the real key to profit. Turn quickly enough and the company is good to go, fail to turn quickly enough and be consigned to the tech grave yard.
Netflix Inc., a provider of online subscription movie and television rentals, offers online customers access to a movie and television library of over 90,000 titles. Founded in 1997, the company currently has a growing customer base of approximately 8.6 million members. The first quarter of 2008 saw an increase in membership of approximately 764 thousand, its largest increase in many quarters.
The company is profitable and posting predictable revenues quarter over quarter. It has not, however, measured up to Wall Street’s level of expectation. Some suggest that Wall Street analysts are being over optimistic given the challenges that the company will be facing in the coming quarters. The conversion to Blu-ray disc will be costly and the summer season typically is fairly slow. An increase in rental fees will help with Blu-ray costs but missing Wall Street estimates by a penny is apparently too much. The company is a solid cash machine regardless of the analysts’ expectations.
Netflix has new and exciting prospects for the very near future to reduce its reliance on the subscriber marketplace for its products. A streaming program has been agreed to by two well known but as-of-yet disclosed companies. Same quarter year earlier revenue growth is up 7% from $0.14 per share to $0.21 this past quarter. A steady revenue growth like this should give investors happiness considering where other consumer revenue targets have been landing lately. Netflix is adapting to a changing market and showing its ability to keep pace in a dynamic and cautionary environment.
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