UPDATE 2-Coinstar cuts FY rev view on slow DVD growth, shrs down

Thu Jul 29, 2010 6:44pm EDT

* Q2 DVD rev growth slows

* Q2 EPS $0.39 vs est $0.33

* Q2 rev $342.4 mln vs est $381.5 mln

* Shares fall 12 pct in post-market trade

July 29 (Reuters) - Redbox owner Coinstar Inc CSTR.O posted weak quarterly revenue and cut its full-year revenue outlook as the sales growth in its DVD business slowed, sending its shares down 12 percent in extended trade.

Revenue growth at the primary DVD segment -- about 80 percent of total sales -- slipped to 44 percent in the second quarter, down from the 99 percent growth last year and 70 percent growth last quarter.

Coinstar has shifted focus to its fast-growing DVD rental kiosk business, and has shed some non-core businesses recently in a bid to top competition from the DVD rental businesses of Netflix (NFLX.O) and Blockbuster Inc BBI.N.

Last week, Netflix also posted weak quarterly revenue as many new subscribers signed up for lower-priced plans that offer unlimited streaming. [ID:nSDN211075]

DVD rental companies have been moving to Web video subscription from physical DVD distribution, as customers opt to stream movies and TV shows rather than order discs via mail.

The company, which recently sold its electronic payment services business, said it now expects 2010 revenue of $1.43 billion to $1.51 billion, compared with its previous view of $1.53 billion to $1.63 billion.

Coinstar, however, raised its 2010 profit outlook range by 6 cents to a new range of $1.88 to $2.00 a share.

Coinstar, which also operates coin-counting machines, posted an almost two-fold increase in second-quarter net income to $13.4 million, or 41 cents a share. Income from continuing operations was 39 cents a share.

Revenue rose 35 percent to $342.4 million. [ID:nASA00L0B]

Analysts on an average were expecting earnings of 33 cents a share, excluding items, and revenue of $381.5 million, according to Thomson Reuters I/B/E/S.

Shares of Bellevue, Washington-based Coinstar, which have risen more than 85 percent in the last six months, were trading down $3.89 at $44.20 in extended trade. They closed at $48.09 Thursday on Nasdaq. (Reporting by Sayantani Ghosh and Anurag Kotoky in Bangalore; Editing by Maju Samuel and Savio D'Souza)

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