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Netflix (NasdaqGS:NFLX) released results which were at the lower end of guidance. The press release header would have you believe substantial progress is being made. Read the press release carefully. 2007 Q1 free cash flow is now negative $18 million compared to positive $11.6 million for the comparable Q1 in 2006. Also Q4 2006 was previously positive. How long will the cash reserves last?

Netflix is riding two headstrong horses hoping that one will save them. They are working on developing technology for on-line down loads. In this regard Tech and Development spending is up 40%. Sounds good but the overall dollar amount is still small compared to other competing and disrupting budgets.

The other horse is clients. They are adding somewhat but the costs of marketing are up 36% when comparing comparable quarters. The cost of DVD libraries is up a meagre 9% which means they do not feel the need to invest in product as the client is not showing up fast enough.

To top it off G&A spending is up 47%. That's not good and indicates problems keep biting this company in the worst way.

Netflix your best asset are the clients. Make a deal with someone who has the technology soon. Other wise both horses will burn themselves out and you will be run over as another also ran.

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