UPDATE 2-Pandora Media files for IPO of up to $100 mln

Fri Feb 11, 2011 7:49pm EST

* Price, number of shares not revealed

* Reported $90 mln in rev over 3 quarters of FY11

* Morgan Stanley, JPMorgan, lead underwriters (Adds analysts comment, details from filing, bylines)

By Gabriel Madway and Alina Selyukh

SAN FRANCISCO, Feb 11 (Reuters) - Internet radio company Pandora Media Inc filed to raise up to $100 million in an initial public offering of common stock, becoming the latest technology company to test the public markets.

Pandora, which runs an online service that allows users to stream free music based on feedback from the listener, has 80 million registered users.

The company did not reveal the price range or the number of shares it plans to sell in the IPO.

"Pandora has tremendous reach, and radio still monetizes well in terms of the ability to capture people's attention," said BGC Partners analyst Colin Gillis.

According to a filing with the U.S. Securities and Exchange Commission on Friday, Pandora had $55 million in revenue in fiscal 2010, and $90 million through the first three quarters of 2011.

The company posted a net loss of $16.8 million last year, but its loss had shrunk to $328,000 through the first nine months of 2011.

Pandora launched its service in 2005. The company said it expects to incur annual operating losses at least through fiscal 2012.

Pandora has nearly doubled its marketing and sales spending since 2008 and grew its content acquisition spending more than five-fold, the filing showed.

The company, based in Oakland, California, makes money primarily by selling advertising, although it also sells premium subscriptions.

Reuters had reported last month that Pandora was in talks with bankers to go public. Daily deals website Groupon is also considering an initial public offering. [ID:nN14114521]

The flurry in activity by Web companies may be a sign they are eager to take advantage of high valuations being seen in the industry.

"You want to hit the window when the window is open," Gillis said.

WEB IPO ACTIVITY

Demand Media (DMD.N), an online company that relies on freelance writers to churn out articles and video designed to appear at the top of Internet searches, had a successful IPO last month. It was seen as something of an icebreaker for Internet-related deals this year. [ID:nN26131589]

Pandora has selected Morgan Stanley and J.P. Morgan as leading underwriters for its offering.

The company said in the filing it would use part of its net proceeds to pay dividends on convertible preferred stock that would be converted into common stock after the IPO.

Pandora's main venture-capital investors -- Crosslink Capital, Walden Venture Capital and Greylock Partners -- together own more than 50 percent of the company.

Tim Westergren, Pandora's founder, owns roughly 2 percent of its shares.

The company's board members include Peter Chernin, former chief operating officer of News Corp (NWSA.O), and Barry McCarthy, former chief financial officer of Netflix (NFLX.O).

Pandora is different from other streaming music services because it uses algorithms and the Music Genome project -- a database built by teams of musicians that analyzes songs -- to choose music for its users.

Start-up Spotify offers streamed access to millions of music tracks, which consumers can also buy. The company has 10 million users in Europe and is expected to expand to the United States soon. [ID:nLDE70C0W8] (Reporting by Gabriel Madway in San Francisco, Alina Selyukh in New York and Himank Sharma in Bangalore; Editing by Richard Chang)