Rich Fiscus
2 Feb 2008 22:50
Netflix has announced a plan to buy back $100 million in stock by the end of the year. After the company endured their first real competition ever when Blockbuster was seen as a serious competitor, and even managed to take some customers from the leader in online DVD rental. However, with Blockbuster appointing a new CEO whose focus on profitability has changed that company's focus from beating Netflix to entering the kiosk market Netflix has seemingly had no problem luring customers back, resulting in higher earnings for the fourth quarter of last year.
With the U.S. economy looking ready for a full blown recession at any time it seems like an obvious time for Netflix to make such a move. Even many companies reporting good to excellent earnings have faced the wrath of shareholders who aren't happy with relatively low sales forecasts. If Netflix's stock price becomes another casualty of shareholder dissatisfaction it would be a perfect opportunity for the company to put their increased profits from last year to good use.
Although last year's competition with Blockbuster seems to be put to rest, with Netflix's increased focus on their Watch Instantly on-demand Streaming service, potential competition from Apple TV and other online video services threatens to make the kind of dent in their business that Blockbuster was only able to manage for a few short months. Whether these services can actually manage to become profitable without the traditional DVD rental business still at the core of the Netflix business model remains to be seen. If they are, don't expect Netflix to rest on their laurels.