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Netflix shares fall on profit warning

Movie rental firm will make a loss if it can't recover from Qwikster debacle

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Netflix shares dropped 5.4 per cent in New York trading yesterday after the movie rental firm announced it had raised $400m from existing investors, but warned that it might not do too well next year.

"If we do not reverse the negative consumer sentiment toward our brand, and if we continue to experience significant customer cancellations and a decline in subscriber additions, our results of operations including our cash flow will be adversely impacted," the firm said in a late filing relating to the stock sales.

The video-streaming and DVD rental service dropped itself in it this summer when it announced plans to split up its business and charge more for its packages. For reasons unknown, Netflix decided it would be a good idea to spin off the DVD part of its service into a separate company, which it planned to name Qwikster.

The wildly unpopular decision led to subscribers leaving the company in their droves and eventually the reversal of the split.

Netflix is now planning its entry to the UK and Europe next year in moves that it hopes can mark a change in its fortunes. To get that change going, it raised two lots of $200m by selling shares to long-time investors in the company: T Rowe Price Associates and Technology Crossover Ventures.

The market, however, was not impressed enough by the share sale to discount the warning about profits next year, and shares dropped 5.4 per cent to $70.45. They fell another 0.7 per cent, to $69.77 in early trading on Wednesday. ®

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