Updated from 8:30

Netflix ( NFLX), the DVD-by-mail outfit whose stock has become one of the great bull-and-bear battlefields of the past year, was under heavy pressure Friday morning after missing earnings estimates.

In early trading, the heavily shorted stock was down $6.37, or 19.9%, to $25.63.

The company said Thursday it earned $2.80 million, or 11 cents a share, in the three months to June 30, down from $3.31 million, or 8 cents a share, last year. Revenue rose 90% from a year ago to $120.3 million. Excluding stock-based compensation costs, Netflix earned $7 million, or 11 cents a share, in the latest quarter compared with $5 million, or 8 cents a share, last year.

Analysts had been expecting earnings before stock-based compensation of 13 cents a share on revenue of $119.7 million in the 2004 quarter.

Netflix stock has careened around over the past year, rising from below $15 last summer to nearly $40 in April before the company announced a monthly price hike that knocked it back below $30. The stock, which trades an average of more than 2 million shares a day, regularly rises or falls violently on changes in perceptions of how efficiently the company will add subscribers, and how long it can keep them.

Netflix ended the second quarter of 2004 with 2,093,000 total subscribers, having added 583,000 new trial subscribers during the period, 78% more than it added a year ago. The company spent an average of $35.12 to acquire a new-trial subcriber in the second quarter, up from $30.45 in the year-ago period and unchanged from the first quarter. The company expects new-trial subscriber acquisition costs to be $37 to $39 in the third quarter, reflecting increased spending on television advertising.

Churn, which measures how fast customers leave the service, was 5.6% in the second quarter, unchanged from a year ago and up from 4.7% in the first quarter.

"After increasing immediately following the April 15 announcement of the June 15 price increase, the subscriber cancellation rate recovered and since late May, has returned to the rate and the pattern the company experienced in the comparable period last year," the company said. Churn includes free trial subscribers as well as paying subscribers who elect not to renew their monthly subscription service during the quarter.

Netflix issued quarterly guidance that was roughly consistent with existing forecasts. The company expects to post non-operating earnings of $10.2 million to $13.7 million on revenue of $141 million to $145 million in the third quarter, and non-operating earnings of $12.5 million to $18.5 million on revenue of $150 million to $160 million in the fourth quarter.

Analysts were looking for earnings of 20 cents on revenue of $141.0 million in the third quarter and earnings of 19 cents a share on revenue of $157.9 million in the fourth quarter.

The company expects to end the third quarter with 2,150,000 to 2,350,000 subscribers, and end the fourth quarter with 2,400,000 to 2,700,000.