Netflix Inc. added a better-than-expected 3.28 million streaming
subscribers in the June quarter, as the video service continued to
sacrifice profit amid an ambitious international expansion.
The company, based in Los Gatos, Calif., plans to expand service
to 200 countries by the end of next year, with Japan, Portugal,
Italy and Spain slated to join this fall. The most recently
completed period represented the first full quarters in Australia
and New Zealand.
Netflix's quarterly results, however, show the inherent risks
associated with expanding operations and doing business abroad.
Profit fell 63% in the quarter as costs increased to buy and create
content, and the strong U.S. dollar lowers the value of revenue
generated outside the U.S.
Netflix, the pioneer of Internet TV, faces increased competition
as traditional media and technology companies add streaming
services, including Comcast Corp., which said it plans to roll out
a streaming service to its broadband subscribers this summer.
Shares, which started trading Wednesday at the new price
reflecting the company's 7-for-1 stock split, surged 11% to $109 in
late trading. Netflix, the pioneer of Internet TV, has been the
S&P best performer this year, with shares more than doubling in
price.
Overall, Netflix reported a profit of $26.3 million, or 6 cents
a share, down from $71 million, or 16 cents a share, a year
earlier.
Revenue rose to $1.64 billion from $1.34 billion.
Before the stock split, Netflix had projected 26 cents a share
on $1.47 billion in revenue. Analysts surveyed by Thomson Reuters
recently projected four cents a share, accounting for the split, on
$1.65 billion in revenue.
For the current quarter, Netflix projects profit of 7 cents a
share, compared with the consensus of five cents a share.
Separately, Netflix said it would support Charter Communications
Inc.'s deal to buy Time Warner Cable Inc. so long as Charter
adheres to its new policy not to charge content companies and
long-haul telecom carriers to interconnect to its network.
Though Netflix grudgingly struck a "paid" interconnection deal
with Comcast early last year, it lashed out publicly against the
practice of such charges and made the deal a cornerstone of its
opposition to Comcast's ill-fated merger with Time Warner
Cable.
Write to Maria Armental at maria.armental@wsj.com
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