Pandora Media revenue beats on strong ad sales

NEW YORK Thu Aug 25, 2011 6:35pm EDT

NEW YORK (Reuters) - Online radio service Pandora Media Inc reported results that beat expectations on strong advertising sales in its fiscal second quarter.

Pandora shares rose 5.9 percent to $13.20 in after-hours trading following the earnings report on Thursday.

The Internet company had a closely watched IPO in June that surged out of the gate in its early debut only to reverse course as doubts increased about whether it would ever turn a profit.

The company posted a net loss of 4 cents per share. Adjusted for stock-based compensation, Pandora reported a profit of 2 cents per share, blowing past analysts' average forecast of a loss of 3 cents, according to Thomson Reuters I/B/E/S.

"You still have the concerns but when you're posting 100 percent revenue growth and you can continue that over a while, that helps," said Albert Fried & Co analyst Rich Tullo.

Pandora reported quarterly revenue increased 117 percent to $67 million, beating the average analyst estimate of $61.1 million.

Advertising revenue rose 118 percent to $58.3 million.

"We have great respect and appreciation for profitability but at this early stage in the game we think the key is growth," Pandora Chief Executive Joseph Kennedy said in an interview with Reuters.

Pandora is up against traditional radio companies, satellite radio provider Sirius XM Radio Inc, music services such as Rhapsody and Spotify, and offerings from Apple Inc, Google Inc and Amazon.com Inc.

Pandora said its estimated share of total U.S. radio listening was 3.6 percent at the end of the second quarter, up from 1.8 percent a year ago.

"We see a tremendous opportunity ahead and we are investing heavily," Kennedy said.

For the full year, Pandora forecast revenue would be in the $270 million to $275 million range -- above analysts' average expectation of $259.95 million.

The company, which has been around for a decade and was first known as TheSavageBeast, runs a mostly free service that allows listeners to create music playlists. It has about 100 million registered users and is mainly supported by advertising revenue.

One major concern for Pandora is the more users it attracts, the more it must pay record labels in licensing fees.

Kennedy said Pandora's rates for music licensing fees are set through 2015 and the company expects in the long term that content acquisition will represent about 40 percent of revenue versus the current 50 percent.

Pandora shares rose 3.3 pct to close at $12.47 during the regular session on the New York Stock Exchange.

(Reporting by Jennifer Saba and Liana B. Baker; editing by Gary Hill)

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