UPDATE 3-Netflix expects strong 2010 growth, shares rise

* Q4 EPS 56 cents versus 38 cents year ago

* Shares rise 15 percent after hours (Adds more details, analyst comment, byline)

By Sue Zeidler

LOS ANGELES, Jan 27 (Reuters) - Online DVD rental company Netflix Inc (NFLX.O) on Wednesday gave better-than-expected earnings and subscriber forecasts for 2010, citing growing demand for its streamed content offerings, and its shares rose 15 percent in after-hours trading.

Netflix, which has flourished as rivals like Blockbuster Inc BBI.N have lost market share, ended the fourth quarter with 12.3 million subscribers, up 1.2 million from the end of the third quarter.

The Los Gatos, Calif-based company, which has moved aggressively to enable customers to view films streamed from its service to TVs via devices like game consoles, said fourth-quarter net income rose 36 percent to $30.9 million, or 56 cents per share, from $22.7 million, or 38 cents per share, a year earlier.

Netflix posted its strong results as another competitor, Movie Gallery Inc was reportedly planning to file for Chapter 11 bankruptcy, according to the Wall Street Journal.

Its earnings also landed on the same day that Apple Inc(AAPL.O) unveiled its widely-anticipated iPad tablet, touted as a do-everything media gadget that can surf the Web, play movies and video games and display electronic books.

When asked if Netflix would seek to get its service available on the iPad, Netflix Chief Executive Officer Reed Hastings said he did not think so in the near term.

"Mobile is not the sweet spot for movie watching," he said. "It may be something we'd look at it in the next two years, but for now we're focused on the TV and video game consoles."

Netflix said it expects to end 2010 with between 15.5 million to 16.3 million subscribers, representing subscriber growth of 26 percent to 33 percent.

"More than one million net additions in one quarter amazes me, because I remember vividly how it took us four long years, from 1999 to 2003, to get to our first million subscribers," said Hastings in a statement referring to the latest quarter.

Netflix posted year-over-year subscriber growth of 18 percent in 2007, 26 percent growth in 2008 and 31 percent growth in 2009.

Netflix shares rose to $58.43 in extended trading after closing at $50.97 on Nasdaq.

"I'm amazed at their subs growth forecast. It's unlike them to be so aggressive on guidance," said Michael Pachter, an analyst with Wedbush Morgan Securities. Neither Pachter or Wedbush own any securities in Netflix.

Netflix said it expected full year 2010 net income in the range of $125 million to $137 million, with earnings per share in the $2.28 to $2.50 per diluted share range.

Analysts on average had forecast the company to post earnings of $2.24 a share for 2010.

Pachter said Netflix's strong performance was likely fueled by a defection of customers from rival Blockbuster, as well as good customer response to a recent deal to provide movies to TVs via Sony Corp's (6758.T) PlayStation 3 console.

Netflix also recently inked a deal with Nintendo (7974.OS) to allow Wii users to stream movies and TV episodes to their television sets this spring. And Microsoft Corp's (MSFT.O) Xbox has been streaming movies from Netflix since 2008.

"In 2010, we expect to extend our operating momentum as we grow the business both rapidly and profitably," Reed Hastings, Netflix's chief executive officer said in a statement.

Revenue for the fourth quarter of 2009 was $444.5 million, representing 24 percent year-over-year growth from $359.6 million for the fourth quarter of 2008.

Subscriber acquisition cost for fiscal 2009 was $25.23 per gross subscriber addition, down from $26.67 for fiscal 2008.

Churn -- the rate of subscriber cancellations -- for the fourth quarter was 3.9 percent, down from 4.2 percent a year earlier.

David Miller of investment bank Caris & Co said Netflix has one of the lowest churn rates among any media-related subscription offerings. He expects to see continued tangible margin improvement as the company's move to streaming is considerably cheaper than supporting postage and packaging costs.

Miller does not maintain a position in Netflix and his firm has not provided any investment banking services for Netflix. (Reporting by Susan Zeidler; editing by Carol Bishopric)