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Netflix speeds up global expansion, adds more users than expected; shares soar

Last updated: 13:03 21 Jan 2015 GMT, First published: 14:03 21 Jan 2015 GMT

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Netflix (NASDAQ:NFLX), a streaming video service, said it plans to expand to 200 countries by 2017, up from its current 50, while staying profitable. Shares surged.

“We then intend to generate material global profits from 2017 onwards,” Chief Executive Officer Reed Hastings and his finance chief, David Wells, said on the company’s website late yesterday.

Hastings said his company was encouraged by results in its first set of markets, including Canada and Nordic and Latin American countries, which have turned profitable as a group.

“The ability to click and watch and binge episodes has really resonated with people,” Hastings said. “It has made us realize this is very likely to work on a global basis.”

Last fall, Netflix started offering its service in six European countries, including France and Germany. The company said it expects to add Australia and New Zealand later this quarter. Netflix is also exploring plans to enter China.

The outlook reassured investors who have expressed concerns about the company’s narrow margins, widening international losses and a budget for films and TV shows that’s swollen to $9.5 billion from $7.3 billion in the past year.

Shares rose as much as 18 percent to $411.24 in New York premarket trade today. The stock has rallied almost seven fold in the past five years.

The company said it had exceeded its forecast for total paid streaming subscribers. That number increased to 54.5 million in the quarter that ended December 31, up 31.5 percent from the same period in 2013.

International subscriber growth overpowered gains in the U.S. for the third straight quarter. Users outside the U.S. expanded by 2.43 million in the fourth quarter, reaching 18.3 million.

Netflix expects to add another 2.25 million international customers this quarter. It already has more than 5 million users in Latin America.

Net income rose to $83.4 million, or $1.35 per share, in the fourth quarter ended Dec. 31, from $48.4 million, or 79 cents per share, a year earlier.

Removing a $0.63 benefit from a tax accrual release related to resolution of tax audit, the company reported a profit of $0.72 per share.

Revenue increased to $1.48 billion from $1.18 billion.

Twenty-four analysts on average had expected profit of $0.45 per share on revenue of $1.48 billion, according to Capital IQ estimates.

Netflix has been a disruptive force in the U.S. pay-TV world, luring customers away from cable and satellite TV providers. But the streaming service could face new competition itself as other companies enter the online-video market. Time Warner’s (NYSE:TWX) HBO this year will offer a standalone streaming service, while Dish Network (NASDAQ:DISH) is rolling out a $20-a-month online-TV package.

Netflix is pouring resources into original productions. The company said it would release 320 hours of original programming this year, about three times its offerings in 2014. That includes about 65 new and returning series, movies and other content. Netflix said it planned to raise at least a billion dollars of additional long-term debt to finance the material.

On the roster for the coming months are new seasons for the company’s popular “House of Cards” political drama and its “Orange Is the New Black” prison comedy. New series include the comedy “Unbreakable Kimmy Schmidt” from Tina Fey and Robert Carlock, and “Grace and Frankie,” starring Jane Fonda and Lily Tomlin as a pair of “frenemies.”

Netflix said it would offer the "controversial comedy" movie "The Interview" to U.S. and Canadian subscribers beginning January 24.

The Sony Pictures-produced comedy about a fictional plot to assassinate North Korean leader Kim Jong Un is believed to have triggered a cyber attack on the studio and racked up over $40 million in sales from 5.8 million digital downloads.

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