Netflix Inc. has decided to chop 160 jobs in Fremont, but the company said Tuesday the reductions are due to its quest to deliver movies in a more cutting-edge way.
Los Gatos-based Netflix will eliminate part-time, temporary workers through the reductions, company spokesman Steve Swayze said.
The first round of cuts will eliminate 131 jobs by late June. The next round will trim another 29 position by mid-August. The staff reductions were detailed in an official company filing with a state labor agency.
"We have more automation in the distribution centers than in prior years," Swayze said.
Netflix built its business on postal deliveries of movies on DVDs to customers.
More recently, however, the company has streamed more movies to personal computers and television sets.
"Streaming is the future for Netflix," said Justin Patterson, an analyst with the Nashville, Tenn., office of investment firm Morgan Keenan & Co.
The dismissed employees will face the pain of job loss in a feeble economy.
The cutbacks also underscore how today's accelerated pace of technology also can destroy outmoded work.
"If you have more streaming video, you don't need as many people packaging and shipping movies," said Rob Enderle, a San Jose-based market researcher who tracks digital and other advanced technologies.
The video market generally could gallop away from disc-based delivery of TV shows or movies.
"Right now, we are moving away from physical media to electronic media," Enderle said. "That means you will see a change in all the services that underlie that."
The Fremont distribution center, which will remain open despite the downsizing, serves Northern California, Swayze said. Netflix has about 55 distribution centers nationwide.
Netflix intends to roll out the improved machinery for physical delivery of movies at more distribution centers, Swayze said. He would not specify how many centers would be getting upgrades.
"We reduced some part-time labor in favor of automation," he said. "Machines are doing things about four times faster than people were doing them."
The entertainment provider isn't undertaking the job cuts out of weakness in its business or financial results.
"Netflix is a growth company," Swayze said. "We are adding engineers. We are adding salaried staff."
During the 12 months that ended in March, Netflix earned $126 million on sales of $1.77 billion. Compared to a similar 12-month period the year before, profits were up 37 percent and sales rose 24 percent.
For the January-March quarter, Netflix earned $32.3 million on revenues of $493.7 million. Compared to the year-ago quarter, profits jumped 44.3 percent and sales rose 25.3 percent.
"They have a lot of momentum in streaming, and they have a lot of momentum in their overall business," Patterson said.
Investors seem to agree about the momentum. During the one-year period that ended Tuesday, Netflix shares were up 163 percent.
The company also may benefit from the implosion of Hollywood Video and store closures at Blockbuster.
"The problems with the competitors will create more tailwinds," Patterson said.
Contact George Avalos at 925-977-8477.