The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (TheStreet) -- To be clear, the headline does not contain a direct quote from Netflix (NFLX) CEO Reed Hastings. When asked on his company's Monday afternoon conference call if he had plans to spin off the DVD division, Hastings did not give his usual long, thorough, articulate and well-thought out answer.
"No, we're not thinking of that." That was Hastings' exact response. It sounded as if it came mid-swallow or during a yawn. And it was typical Reed Hastings: Discount the idea as complete and total lunacy by feigning indifference and apathy with the standard touch of arrogance. It's almost as if the question is so stupid, I have to reduce myself to serf or peasant status to muster a response.
Because we believe we can best generate profits and satisfaction by keeping DVD by mail as a division, we have no intention of selling it. In Q4, we'll also return to marketing our DVD by mail service, something we haven't done for many quarters. Our goal is to keep DVD as healthy as possible for as many years as possible.Finally, at least a hint of consistency. We will not sell DVD. At least in the first sentence, but not so much in the second and third. Here's what Hastings said about DVD just six months later:
DVD will do whatever it's going to do. We're not -- we're going to try to not hurt it, but we're not putting a lot of time and energy into doing anything particular around it . . . .I fully realize we've been over this before, but it bears repeating because things have a way of changing on a dime at Netflix. Lots of folks are wondering this morning why Netflix crashed on what was not a horrific earnings report. In this article, I explain why Netflix crashed (and will continue to crash). I also discuss why, before long, Hastings might just change his mind on DVDs yet again. Reason for the Latest Implosion It's really quite simple. You can break down the numbers all you want. You can try to pinpoint particulars that shed light on what happened here. There's little need for that, though. Netflix tanked because it is no longer a growth company in the spirit of today's "overvalued" growth companies like Pandora (P) and Lululemon (LULU). As I have explained in several recent articles , Wall Street will always "overvalue" companies in perpetual start-up mode. Profitability, for all intents and purposes, does not enter the equation. Investors in high-flying growth stocks look for three things: (1) logical and realistic long-term opportunity, (2) enough reinvestment into the business to seize those opportunities (spending) and (3) rapidly growing revenue.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV