Netflix seems to have recovered from the substantial loss of customers it felt after an unpopular price increase; the company has seen an increase in subscribers that matches the initial decrease it saw, a considerable recovery from what could have been a detrimental business move. 

Wednesday’s fourth-quarter figures show Netflix up from 23.8 million subscribers in September to 2.44 million in December. This increase of 600,000 customers almost matches its decrease by 800,000 customers earlier in the year in response to its U.S. price rise, an increase of close to 60 percent.

This resurgence is a good sign for the company after a tumultuous few months in the stock exchange. Netflix’s fourth-quarter figures brought about an increase of stock value close to 16 percent.

Positive fourth-quarter performance should help establish Netflix CEO Reed Hastings in a position of relative success, a vast reversal from a former place of criticism on Internet forums and analytical notes for what appeared to be a gross miscalculation of subscriber reaction to price increase.

“You are never as smart or dumb as they say,” Hastings said in a Wednesday interview. “We know we are just beginning to climb back in terms of consumer trust and affection.”

The earlier backlash from price raises left Netflix with a reaction that resulted in a 14 percent earnings decrease for the fourth-quarter.

A year ago Netflix profited $47.1 million, or 87 cents per share; the current numbers are $40.7 million, or 73 cents per share.  FactSet’s (News - Alert) analyst poll projected far more damaging profit decrease: fourth earnings of 54 cents per share. The reality was a Netflix revenue climb of 47 percent to $876 million, $19 million above the aforementioned poll’s forecast.

The stock jumped by $15.08, close to 16 percent, to $110.12 in extended trading and was up $2.37 (2.6 percent) at $95.04 in regular trading. If this increase continues the stock could be at its highest since last quarter’s end. Netflix still has a long way to a full recovery with highest stock prices at $305 in July, immediately prior to the release of its price increase.

“It's still too early to know how much success Netflix is going to have this year, but seeing those gains in customers makes investors feel safer,” said Frost & Sullivan (News - Alert) analyst Dan Rayburn.

Now that the backlash over the higher prices has eased, Netflix's biggest challenge may be fending off competitive challenges to its primary business of streaming video over high-speed Internet connections.  Amazon Inc., Verizon (News - Alert) Communications (possibly in partnership with Coinstar Inc.’s Redbox), and Google Inc.’s YouTube are all attempting to offer competition to Netflix’s streaming video services.

The company is also undergoing and international expansion that will beset it with difficulty in avoiding loss for the year, which can only be avoiding by attempting to stimulate customer growth.

Cancellations of DVD-by-mail rental plans should offset the majority of streaming gains; Hastings sees the DVD service as out of date with technological advancement. A predicted decrease in DVD subscriptions by 1.5 million matches Hastings’ viewpoint and the company’s loss of 2.8 million DVD customers in the fourth quarter.

“We expect DVD subscribers to decline every quarter forever,” Hastings told analysts during a Wednesday conference call.

The company views the push towards streaming as a wise business move, but the loss of DVD customers will damage company performance for the year because price increases made DVD delivery temporarily more profitable.

Ultimately Netflix itself anticipates, for the first time in ten years, an annual loss; giving a hint at just how large it could be with a projection for first-quarter loss at 16 cents to 49 cents a share. The average analyst expectation is around 29 cents per share.

Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO East 2012, taking place Jan. 31-Feb. 3 2012, in Miami, FL. ITEXPO (News - Alert) offers an educational program to help corporate decision makers select the right IP-based voice, video, fax and unified communications solutions to improve their operations. It's also where service providers learn how to profitably roll out the services their subscribers are clamoring for – and where resellers can learn about new growth opportunities. For more information on registering for ITEXPO registration, click here.

Stay in touch with everything happening at ITEXPO. Follow us on Twitter.