January 21, 2015 / 12:09 AM / 6 years ago

Netflix accelerates global push as U.S. growth slows

(Reuters) - Streaming video service Netflix Inc said it will complete its expansion into 200 countries within two years, faster than expected, as the company builds its presence overseas while growth in the United States slows.

Netflix said on Tuesday it added 4.3 million subscribers in the quarter that ended in December, beating its own guidance thanks to higher-than-expected interest overseas. Investors welcomed the news, sending shares up 15 percent in after-hours trading.

In the United States, Netflix pulled in 1.9 million streaming customers, down from 2.3 million additions a year earlier, and forecast signing up 1.8 million more in the current quarter.

Netflix believes the slowdown is “a natural progression in our large U.S. market as we grow,” Netflix said in a quarterly letter to shareholders.

In international markets, however, “progress has been so strong that we now believe we can complete our global expansion over the next two years, while staying profitable, which is earlier than we expected,” it said.

Netflix added 2.4 million customers in its roughly 50 international markets, bringing its global total to 57.4 million worldwide.

“This company is going through a transition, one of a domestic growth story to one of domestic maturity, where the growth story is really international,” FBR Capital Markets analyst Barton Crockett said.

New markets will include a “modest investment” in China, Chief Executive Officer Reed Hastings said on a conference call. Netflix needs a license to operate in the country, and “it’s not 100 percent clear we’ll be able to do that,” he said.

Netflix also said it will increase the percentage of content spending devoted to original series such as “Orange Is the New Black” and “House of Cards,” and will finance the expansion with long-term debt. The company is investing in original shows as it faces competition from Time Warner Inc’s HBO, Amazon.com and Hulu, as well as on-demand offerings from pay TV providers.

For the quarter that ended in December, net income rose to $83.4 million, or $1.35 per share, from $48.4 million, or 79 cents per share, a year earlier.

Excluding a 63-cent benefit from a tax accrual release related to resolution of a tax audit, the company reported a profit of 72 cents per share.

The Netflix logo is shown in this illustration photograph in Encinitas, California October 14, 2014. REUTERS/Mike Blake

Revenue rose to $1.48 billion from $1.18 billion.

Analysts had expected profit of 45 cents per share, according to Thomson Reuters I/B/E/S.

Netflix shares rose 15.7 percent to $403.44 in after-hours trading.

Reporting by Lisa Richwine in Los Angeles and Lehar Maan in Bengaluru; Editing by Simon Jennings and Lisa Shumaker

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