UPDATE 2-Coinstar sees weak Q1 on excess inventory, shares down
* Q4 cont ops EPS $0.68 meets Street view
* Sees Q1 EPS cont ops $0.15-$0.25 vs est $0.57
* Sees Q1 rev $400-$420 mln vs est $404.2 mln
* Shares down 10 pct after market
By Supantha Mukherjee BANGALORE, Feb 3 (Reuters) - Coinstar Inc CSTR.O, the electronic kiosk company forecast first-quarter earnings much below Street view, hurt by excess inventory purchased at its Redbox unit, sending its shares down 10 percent in after-market trade.
"It just doesn't make sense that they bought twice as much inventory as they need. I don't accept that," Wedbush Securities analyst Michael Pachter told Reuters.
"I can only conclude that they are being extremely conservative when they guide for the first quarter."
Before the December holiday season, which was Redbox's first holiday season with 28-day delayed DVD titles, Coinstar removed older inventory early and purchased new titles expecting higher demand, which did not materialize.
As part of a settlement last year, Redbox had agreed with News Corp's (NWSA.O) Twentieth Century Fox, Universal Pictures owned by General Electric Co (GE.N) and Time Warner Inc's (TWX.N) Warner Bros, to wait for 28 days after a DVD title is released before offering them for rent.
In the first quarter, gross margins will continue to be challenged as a result of the purchasing decisions made in the fourth quarter, including higher-than-necessary purchases for January titles, Chief Financial Officer Scott Di Valerio said on a conference call.
"They have to prove now to investors that the problem that they have with buying too much inventory is something they can correct and then they have to do it," analyst Pachter said.
The Bellevue, Washington company, which courted controversy with Hollywood for Redbox's $1 a night DVDs, forecast first-quarter earnings from continuing operations of 15-25 cents a share, on revenue of $400-$420 million.
Analysts were expecting earnings of 57 cents a share, on revenue of $404.2 million, according to Thomson Reuters I/B/E/S.
However, the company expects strong growth in the third quarter and solid growth in the fourth quarter.
Shares of the company were down $4.47 at $39.77 in trading after the bell. The stock closed at $44.24 on Wednesday on Nasdaq. (Reporting by Supantha Mukherjee in Bangalore; Editing by Roshni Menon)
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