Netflix Shares Plunge Wipes Out $2 Billion in Value

Shares of entertainment provider Netflix plunged 35 percent after the company reported 810,000 subscribers had fled and expectations of a 2012 loss.

By late morning, Netflix shares were at $77.34, down $41.36 or about 35 percent from the Monday close. The swoon wiped out $2 billion from the Los Gatos, Calif.-based company's market value.

Netflix is now valued at only $4.06 billion.

The drop was the biggest ever for the entertainment provider whose shares hit $298.13 in July, their all-time high. Wall Street firms including Goldman Sachs, Jefferies and Needham downgraded the stock.

CEO Reed Hastings told investors Netflix expects further subscriber defections in the current quarter, although the Dec. 31 projection is for a slight rebound, to about 21.5 million.

Netflix reported third-quarter net income jumped 65 percent to $62.5 million as revenue rose 49 percent to $821.8 million. The profit came despite the company's 60 percent fee hike and an ill-fated plan to split into two companies, Netflix and Qwikster.

Hastings estimated Netflix will post fourth-quarter net income between $19 million and $37 million on revenue around $875 million --- down from the third quarter. Analysts had been expecting much higher profit and revenue exceeding $900 million.

The focus for us is getting back our reputation and brand strength, Hastings said after the earnings announcement. But that's not trhough grand gestures, signing some crazy content deal or doing something else.

Netflix's woes come as rivals are growing. Amazon's Prime service is being offered free for new buyers of the Kindle Fire and Apple is offering new media services through the cloud.