Group 1 - NetFlix.com, Inc. Case Study

Group 1 - NetFlix.com, Inc. Case Study - Corporate...

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Corporate Financial Management - Section: 32236-001 Netflix.com, Inc. KAB Consulting Inc. - Group 1 Ansel Alfonso, Kathy Maccagnone and Bilal Mirza June 13, 2011
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June 13, 2011 Mr. Reed Hastings Netflix, Inc. 100 Winchester Circle Los Gatos, CA 95032 Dear Mr. Hastings: We would first like to thank you for giving us the opportunity to analyze your current situation and help you make a decision on whether or not to proceed with your anticipated initial public offering (IPO). With the aid of Mr. Barry McCarthy, we will help forecast your future cash flow requirements in order to successfully proceed with the IPO. We appreciate you sharing your long-term goals and this will help us assess the company’s performance to date. As you will note per the attached, we have constructed our own subscriber model, using a discount rate of 20%, to predict the value of a new Netflix subscriber. We also want to share our ideas about your current business model and the value this brings to your company. After reviewing our case study analysis and recommendations, we would like to discuss this information in further detail. Please feel free to call with any questions or concerns you may have. Sincerely, Ansel Alfonso      Kathy Maccagnone Bilal Mirza Ansel Alfonso Kathy Maccagnone Bilal Mirza
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Corporate Financial Management: NetFlix.com, Inc. Netflix.com, Inc. (Netflix), founded in 1997 by Reed Hastings and Marc Randolph, is the leading Internet rental service for subscribers to enjoy television shows and movies. After submitting its S-1 filing in July of 2000 for the company’s initial public offering (IPO), Reed Hastings is concerned about the company’s cash flow. This concern came from reports from investment bankers indicating the company would require signs of positive cash flow within a 12-month scope for their IPO to be a success. The business model currently used by Netflix seems promising, but may need to be changed. We recognize Barry McCarthy, the CFO of Netflix, uses your current subscriber model to forecast future cash flows. One way we thought may help envision future cash flow is to create a new annual subscriber model. Although this will predict cash flows for the next five years, we want to make sure it brings value to the company. Understanding the long-term objectives and how Netflix plans to accomplish these objectives can give us a defined target on where the company wants to be in the future. Long-Term Objectives
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Group 1 - NetFlix.com, Inc. Case Study - Corporate...

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