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DVD Service Netflix Files IPO Plans

March 7, 2002

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SAN FRANCISCO (AP) _ Fast-growing online DVD rental service Netflix Inc. plans to raise $115 million with an initial public offering of its stock, providing another flicker of optimism in the depressed dot-com industry.

The Los Gatos-based company’s filing this week with the Securities and Exchange Commission didn’t specify how many shares will be sold or provide a per-share price target. Netflix will list its shares under the ticker symbol ``NFLX″ on the Nasdaq Stock Market.

Earlier in the week, online clearance center Overstock.com Inc. of Salt Lake City filed an IPO seeking to raise $36.8 million.

By pursuing the IPOs, Netflix and Overstock are betting skittish investors will be more receptive to putting money into unprofitable Internet companies with potentially bright futures.

Wall Street has spurned most dot-com companies after being burned badly by the IPOs of Internet companies that went bankrupt over the past two years, saddling investors with huge losses. The frosty climate prompted Netflix to scrap a previously planned IPO in July 2000.

``I wouldn’t say these offerings mean the door is open again, but there may be room for deals from companies that seem to have the right idea and right platform,″ said David Menlow, president of IPOfinancial.com.

Although the worst of the bleeding appears to be over, the dot-com industry remains wounded. Another 18 Internet companies collapsed in February, bringing the total number of dot-com failures to 806 since January 2000, according to Webmergers.com. The February failures represented the lowest total since August 2000, when 10 Internet companies shut down, Webmergers said.

The stock market’s reception to the IPO of online payment service PayPal last month represented a heartening sign for dot-com start-ups.

After overcoming legal and regulatory concerns, Palo Alto-based PayPal sold its IPO at $13 per share and the stock soared 55 percent in its first day of trading. PayPal shares have dipped since then, but the stock remains above its IPO price.

Like PayPal, Netflix is steadily attracting new customers to its service, particularly in the San Francisco Bay area, where the company says 2.6 percent of all households subscribe to its rental service. Netflix isn’t as popular in the East because DVDs take longer to be delivered there from the company’s only distribution center in San Jose.

Since launching its service in September 1999, Netflix has signed up 500,000 subscribers, most of whom pay $19.95 per month to rent up to three DVDs at a time. Netflix mails the DVDs to customers, who return them in postage paid envelopes.

The service’s popularity still hasn’t translated into a profit. The company has lost $136.9 million since its inception, including a loss of $38.3 million last year on revenue of $74.3 million.


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