Pandora earnings forecast disappoints, shares drop

SAN FRANCISCO Thu Aug 22, 2013 5:30pm EDT

SAN FRANCISCO (Reuters) - Internet radio service Pandora Media Inc (P.N) said on Thursday that rising expenditures to acquire music and compete with rivals would push fiscal 2014 earnings below analyst expectations, and its shares slumped 5 percent.

Excluding certain items, Pandora said it expected to earn between 0 and 5 cents per share for the year. That was below the 5-cent profit expected by analysts polled by Thomson Reuters I/B/E/S.

Its shares fell 5 percent to $20.50 in extended trade.

For the second quarter ending in June, Pandora exceeded expectations, posting revenue of $162 million, a 58 percent rise, as it continued to pick up listeners. Its earnings of 4 cents also topped Wall Street expectations of 2 cents.

In an interview, Chief Executive Joe Kennedy said he felt confident the company has proven its mobile monetization strategy. But he signaled that earnings would be depressed in the near future as he pursued an aggressive investment strategy. In the past year, for instance, the company has increased its sales force by three-quarters, he said.

"We're taking the increased margin that we're getting and reallocating to invest in future growth," Kennedy said Thursday. "But everything says we're firing on all cylinders. We're still in the earliest days. We have to invest to make the most of a huge opportunity."

Pandora's shares, which fluctuated wildly for the first year after its June 2011 initial public offering, had surged to new highs in 2013. It closed on Thursday at $21.71.

(Reporting by Gerry Shih; Editing by Andre Grenon and Phil Berlowitz)

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