Blockbuster's

(BBI) - Get Report

loss narrowed sharply in its most recent third quarter, as the $491 million charge it recorded on impaired assets paled in comparison to the whopper writedown it took last year.

Blockbuster lost $491.4 million, or $2.67 a share, in the latest quarter. Excluding the writedown, the company lost $24.6 million, or 13 cents a share, matching the Thomson First Call consensus estimate. A year ago, Blockbuster lost $1.41 billion, or $7.81 a share, including a $1.5 billion charge.

Revenue fell 1.7% to $1.39 billion in the quarter, as higher base rental revenue was offset by a revenue lost from the movie rental chain's elimination of late fees. Analysts were forecasting sales of $1.41 billion in the most recent quarter.

Blockbuster said it plans to cut costs by more than $100 million in 2006 and an additional $50 million in 2007 via overhead reductions, lower marketing spending and non-core divestitures. It will cut annual capital expenditures to $90 million in 2006 from $140 million in 2005 primarily by opening fewer stores.

"As a result of these steps and the changes we have made to our business model over the past two years, we believe we will increase our share of the rental business and benefit from anticipated industry consolidation," the company said. "We will also continue to pursue the growth opportunities offered by online rental and establish Blockbuster Online as a profitable business."

The stock closed at $4.90 Monday.