Netflix Surges on Solid Guidance

The fourth quarter hits estimates too.
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Online movie rental service

Netflix

(NFLX) - Get Report

saw a 60% year-over-year rise in net subscribers and beat analysts' earnings expectations soundly.

The Los Gatos, Calif., movie rental service made $38 million, or 57 cents a share, in the fourth quarter ended Dec. 31, up from $5.6 million, or 9 cents a share, a year ago. Revenue rose 36% from a year ago to $195 million.

Analysts polled by Thomson were looking for a per-share profit of 15 cents on just under $195 million in revenue.

"2005 was another year of solid achievement and continued momentum," said CEO Reed Hastings. "We generated rapid subscriber growth, made the best customer experience even better, ended the year with the lowest churn in our history, and delivered both rapid growth and strong earnings."

Net subscribers hit 4.2 million as churn, measuring monthly customer defections, declined to 4%. The company continues to steal business away from retail-oriented competitor

Blockbuster

(BBI) - Get Report

.

Separately, Netflix said its service will support the first movies available in high-definition DVD when the format becomes available in March. It will also offer titles in Blu-ray format when that product launches later in the year. It has a library of some 55,000 films available to consumers.

"High-definition DVD is the next wave of excitement in home entertainment and we'll be there at its inception," said Hastings. "With far sharper images, better sound and more features, we expect high-def will greatly enhance DVD's consumer appeal and extend its popularity over the next decade or more."

Netflix guided to a first-quarter end-subscriber target of 4.6 million to 4.85 million. The company expects to be around break-even for the quarter on revenue of $219 million to $224 million. For the year, the company expects to make around $32 million on revenue of $960 million with users hitting 5.9 million.

Netflix shares were up 9% late Tuesday, rising $2.32 to $27.06.