* Q4 revenue expected between $120 mln to $123 mln; below
* CEO says advertisers are being prudent; Shares dive on
* Some analysts point to increasing competition
* Q3 revenue rose on strong mobile revenue
(Adds analysts comments, context)
By Jennifer Saba
Dec 4 Pandora Media Inc lowered its
fourth-quarter guidance, blaming a pull back by advertisers on
the so-called looming fiscal cliff, but analysts suggested it
was due more to increasing competition.
The outlook on Tuesday rattled investors, sending Pandora
shares tumbling 20 percent in after-hours trade, as the company
had been steadily increasing its revenue. Last quarter, for
instance, it raised its outlook.
Pandora relies mainly on advertising for revenue and has
been building out its local sales staff in an effort to gain
market share among its competitors. January is typically a
lighter month for Pandora and is hard to pinpoint spending from
advertisers coming off the holiday season.
Pandora Chief Executive Joe Kennedy said advertisers are
being prudent, a change that occurred over the last couple
"We are reflecting the caution we are seeing," Kennedy said
in an interview with Reuters about the lowered forecast. "I
think advertisers are nervous."
U.S. legislators are trying to hash out a deal to avoid a
$600 billion package of tax hikes and federal spending cuts that
would begin on Jan. 1 and could tip the economy into a
Pandora's fiscal fourth quarter ends Jan. 31, which is why
the fiscal cliff figures into its forecast, Kennedy said.
One analyst questioned how much the fiscal cliff plays into
the revised forecast versus the entry of online music companies
including Spotify, Sirius XM Radio, and possibly Apple
Inc, which are staking out Pandora's turf.
"I think the key issue here is that Pandora is facing
increased competition in mobile," said Richard Greenfield, an
analyst with BTIG.
"It's easy to just blame fiscal cliff. The shares fell
because they are missing numbers."
Michael Pachter an analyst with Wedbush Securities said,
"Essentially they are not getting as much advertising revenue as
Pachter added that he doubts advertisers are really snapping
shut their purses because of the fiscal cliff.
The online streaming music service said that it expects
fourth quarter revenue of $120 million to $123 million. Analysts
were expecting revenue of $130.3 million, according to Thomson
On a call with analysts, Kennedy said that a general
uncertainty in the economy exacerbated by fears that legislators
won't come to some agreement was responsible for the lower
"(The caution) is significant across many of the advertisers
we work with," he said in response to a question if specific
advertisers were pulling back on spending versus others.
PUSHING MUSIC LICENSE BILL
For the past decade Pandora has been gaining market share as
it become more popular. The company said that in November total
listener hours pushed past 1 billion, an increase of 58 percent
from the same period last year.
For the third quarter ending October, active users rose 47
percent to 59.2 million.
But as it attracts more listeners, Pandora has to pay more
to license music.
The company is standing behind the Internet Radio Fairness
Act, which would change how royalties are paid to artists. As of
now, online streaming music companies like Pandora pay a
different rate to license music than say traditional radio
Pandora's sponsorship of the bill has been a flashpoint for
the company and some of music's most notable names like Billy
Joel and Rihanna are opposing the proposed change.
For the third quarter, Pandora reported better-than-expected
revenue, up 60 percent to $120 million on strong mobile revenue.
Pandora said mobile revenue, an important metric, rose 112
percent to $73.9 million for the third quarter.
The company reported adjusted earnings per share of 5 cents
in the third quarter ending October, beating analysts'
expectations of a penny.
Shares of Pandora Media closed up 5.4 percent at $9.45 but
shed 20 percent after the results were released.
(Reporting By Jennifer Saba and Liana Baker in New York;
Editing by Peter Lauria and Bernard Orr)