Today: Pandora’s listener growth disappoints investors as company seeks to make nice with musicians. Also: Amazon, Microsoft, Riverbed and Juniper also announce earnings.
The Lead: Pandora falls despite financial advances
A year into his tenure as leader of the most popular online radio offering, Pandora CEO Brian McAndrews faces slowing listener growth, but promised Thursday to combat that issue with higher ad sales and more predictable royalty payments to musicians.
The Oakland streaming-music company said Thursday that it had cut third-quarter losses in half to $2.02 million, or a penny a share, on revenues of $239.6 million, 42 percent higher than a year ago.
Those results beat analysts’ expectations, but Pandora’s popularity did not: The company reported 76.5 million active listeners accessing just short of 5 billion hours of music, barely changed from the previous quarter and lower than outside projections. With Apple and Google actively seeking a stronger foothold in the streaming-music field, lack of solid growth spooked investors, sending Pandora shares down as much as 8 percent in late trading.
McAndrews said expecting listener growth to continue at Pandora’s previous historic rates is “not realistic.” Instead, the CEO pointed to metrics like the share of U.S. radio listening Pandora commands: 9.1 percent in the third quarter, up from 7.8 percent in the same quarter a year ago.
Pandora also pointedly said that revenues were more of a focus than listener hours in the first year of McAndrews’ rein, as the company sought to realize revenues from its large listener base.
“We needed to get monetization in place first before looking to grow listeners,” Chief Financial Officer Mike Herring told Bloomberg News in an interview. “We’re relatively new to this marketing, customer-acquisition world, and we do have ambitions to grow users significantly in the U.S.”
Revenues did impress, as Pandora’s ad sales grew 44 percent from the same quarter a year ago to $194.3 million, easily outpacing growth in the rest of Pandora’s business, which is mostly subscription fees from Pandora One subscribers, who pay $4.99 a month.
McAndrews outlined three keys for Pandora: Listeners, ads and royalties. Pandora has struggled for profitability as it pays out half or more of its revenues to musicians for the rights to play their music, and is involved in tense negotiations and lawsuits seeking to change those rates.
In the third quarter, Pandora paid 46 percent of its revenues out in royalties in the third quarter, its lowest percentage yet. The CEO said Pandora’s best hope for further gains is “strengthening our ties within the larger music community.”
To that end, Pandora signed its first major direct deal with musicians, a contract with independent label group Merlin, then followed that by inking a similar deal with BMG. One of the main selling points for those deals was label access to Pandora’s data on listeners — such as what areas of the country listen to specific music the most and other insights that could help musicians plot their courses — and Pandora decided to release a version of that analytics dashboard to artists this week.
Pandora stock fell to about $21.25 in after-hours action after closing with a 1.8 percent gain at $23.12.
SV150 market report: Stocks bounce ahead of earnings explosion
Wall Street enjoyed one of its best days of the year Thursday ahead of a torrent of earnings reports from tech companies.
Two of the largest American tech companies not based in Silicon Valley dropped their reports Thursday, and Amazon and Microsoft headed in different directions. Microsoft jumped in after-hours trading after showing off big growth credited to CEO Satya Nadella’s push for offerings focused on cloud and mobile. Amazon also revealed large sales growth, but continued to post losses while spending wildly and posted a disappointing holiday forecast, leading to a decrease in after-hours trading.
In Silicon Valley, troubled networking companies Riverbed and Juniper both improved slightly in late trading following their results, while KLA Tencor shot higher after beating expectations and announcing a recapitalization program. Santa Clara components supplier Synaptics plunged more than 12 percent after reporting lower-than expected results and a disappointing forecast , while NetSuite pushed higher after easily beating projections.
Apple continued its record-setting ways, topping $105 for the first time and establishing a new closing high of $104.83 after a gain of 1.8 percent. The Cupertino tech giant is seeking to build another 25 stores in China after officially reaching a deal to end concerns about sapphire supplier GT Advanced Technologies. Facebook joined Apple by setting its own intraday and closing records, pushing higher than $80 for the first time and closing with a 2.1 percent increase to $80.04 while CEO Mark Zuckerberg charmed a Chinese audience and the Menlo Park company debuted a new independent app. Yahoo gained 1.4 percent to $42.60 after images of its soon-to-come homepage redesign leaked to Recode, and Yelp plummeted 18.6 percent to $57.17 after its earnings report disappointed investors.
Up: Workday, EA, Juniper, Salesforce, SunPower, Netflix, Nvidia, SanDisk, Facebook, LinkedIn, Google
Down: Yelp, GoPro
The SV150 index of Silicon Valley’s largest tech companies: Up 26.9, or 1.73 percent, to 1,584.89
The tech-heavy Nasdaq composite index: Up 69.94, or 1.6 percent, to 4,452.79
The blue chip Dow Jones industrial average: Up 216.58, or 1.32 percent, to 16,677.9
And the widely watched Standard & Poor’s 500 index: Up 23.71, or 1.23 percent, to 1,950.82
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