Netflix released its fourth quarter 2012 financial results, surprising Wall Street with a strong showing for the final three months of last year. Not only did the company manage to turn a profit for the quarter, it also added around four million customers globally, two million of which were from the United States.
The main reason this is such a surprise is because Netflix released a letter to investors three months ago warning that the October to December period would likely result in a loss due to the costs associated with its expansion into Scandinavia, which enabled 10 million households in Denmark, Finland, Norway and Sweden to subscribe to the company's streaming service.
Clearly, though, Netflix underestimated the power of the holiday shopping season, which likely helped power new subscriptions due to the sales of connected devices such as tablets and phones.
Image via netflix.com
Overall for the quarter, Netflix reported $8 million in net income, or 13 cents per share, with revenue rising eight percent over the same period in 2011 to hit $945 million. Compared to Wall Street analyst predictions that the company would report a quarterly loss of 13 cents per share, it's no surprise that Netflix shares rose 35 percent to $139.80 in after hours trading after the results were released.
Some say it's Netflix's push to acquire original content that has allowed it to prosper even in the face of stiff competition from the likes of Amazon Prime and Redbox Instant, recently formed by Redbox and Verizon (News - Alert). Indeed, the company will release the first 13 episodes of its original political drama "House of Cards" starring Kevin Spacey next week.
Netflix said it expects the first quarter of 2013 to be fortuitous as well, forecasting the addition of another 1.7 million subscribers. However, the company expects income to be "relatively flat" due to declining DVD profits and higher global operating costs.
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Edited by Brooke Neuman