Netflix Essay

1547 WordsJan 26, 20127 Pages
[pic] Date- October 26, 2009 Presented to- Reed Hastings CEO and Chairman Netflix, Inc. Barry McCarthy Chief Financial Officer Presented by- Javier Delgado University of Illinois Consultant Strategic objectives- Netflix, Inc., an internet retailer offering online rentals of DVD’s via direct mail and incorporated in 1997, has asked us to analyze weather they should proceed with their scheduled Initial Public Offering (IPO) later this year (2000). If not, then when and under what circumstances. Factors that we have analyzed to determine feasibility include the market demand for IPO’S, short- term and long-term cash flow projections, financing needs, time constraints, and micro-economic factors. In addition, we will look at the long term viability of the company. Executive Summary- We began our analysis by first assessing the current situation; current climate for IPO’S and Netflix’s financial picture. The market is such that demand for internet based IPO’S have crashed to a halt. The demise of many high profile internet start-ups has led many investors and banks to head for the exits. The demand for investing in internet companies has definitely exceeded supply the last five years. This led to over market capitalization of many internet companies who never made a profit. Venture capitalists and banks were funding and absorbing the short-term and sunk costs, with the hope of recouping their initial investment in the long term. However, this never materialized, because these start-ups never made any money. Their total costs always exceeded their total revenue. There was never an economic equilibrium with these internet start-ups, because supply never equaled demand. Everyone had a great business plan on paper, but never executed it successfully. Analyzing your financial statements beginning with

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