Netflix Inc, an online DVD rental company has trimmed its fourth-quarter outlook. The company has blamed the U.S. economic downturn for this cut in outlook.

The news comes as a shock to the analysts who were considering Netflix insulated from the US slump. Netflix’s main competitor is Blockbuster Inc but also faces challenges from online video providers such as Apple Inc and Amazon.com Inc.

The company has lowered its forecasts for fourth quarter revenue which has overshadowed its slightly higher earnings-per-share estimate for the quarter.

Netflix shares fell as much as $3.78, or 13 percent, to $25.19 before recovering to close at $26.49.

For the fourth quarter, Netflix now sees revenue at between $353 million to $359 million, down from the prior estimate of $357 million to $367 million. Netflix forecast subscribers to total 8.95 million to 9.25 million in the fourth quarter, down from its previous estimate of 9.1 million to 9.7 million.

Contrary to forecast of Netflix, Blockbuster Inc has raised its 2008 outlook, forecasting $300 million to $315 million in earnings before interest, taxes, depreciation and amortization, which corresponds to net income of $21 million to $36 million.

Renu Singh/ITVoir Network