Pandora Should Watch the Throne; Company’s Spending Plans Betray Fears Over Apple

August 24, 2013 Leave a comment

Updated August 23, 2013, 4:43 p.m. ET

Pandora Should Watch the Throne

Company’s Spending Plans Betray Fears Over Apple

MIRIAM GOTTFRIED

BF-AF628_PANDOR_NS_20130823173303

Pandora Media P -12.90% may be girding for a fight. Or at least investors seem to be reading it that way. The Internet-radio company reported quarterly earnings and revenue late Thursday that beat expectations. Mobile revenue almost doubled year over year. And content costs as a share of revenue fell. Even so, Pandora’s shares tumbled 13% Friday. A big reason: The company tightened the range of its third-quarter and full-year projections due to increasing investment. Pandora now expects full-year earnings to be between zero and five cents a share, compared with an earlier projection of a loss of two cents up to a profit of eight cents.Over the long term, Pandora still aims for the 20% operating margins it laid out ahead of its 2011 initial public offering. But its current focus is boosting sales. So investors who had just begun to glimpse the potential leverage in Pandora’s business model saw hopes dashed for higher profits in the near term.

They may also regard higher investment as a sign that Pandora is bolstering itself ahead of the expected September rollout of Apple‘s AAPL -0.39% iTunes Radio. Pandora said it would lift its 40-hour monthly listening cap for free mobile users Sept. 1, also a possible defense against Apple.

Pandora says this is the first time it has been in a position to invest and that it has developed several technologies that help it curb listening hours. Those, and higher mobile revenue per 1,000 listening hours, have made the cap unnecessary, according to Pandora.

Pandora insists Apple won’t dent its dominance. But there are clear reasons to mount extra defenses. With its preinstalled base of iPhone and iTunes users and mountains of cash, Apple is far more formidable than previous would-be usurpers of the Internet-radio throne.

Filed under TMT Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a comment