Biz Break: Pandora plummets due to growth concerns on busy earnings day [San Jose Mercury News :: ]
(San Jose Mercury News (CA) Via Acquire Media NewsEdge) July 24--Today: Internet radio company Pandora Media falls fast in late trading after earnings report shows slowing growth in revenues, listening hours. Also: More than a dozen other Silicon Valley tech companies release earnings, along with Amazon.
The Lead: Pandora falls amid continuing growth concerns
Pandora Media stock plummeted after the Oakland streaming-music company showed off its latest quarterly earnings report Thursday, as revenue and listener growth slowed while losses expanded, and the company forecast further decreased growth.
Pandora reported a net loss of $11.7 million, or 6 cents a share, on sales of $218.9 million for the second quarter, with losses increasing 72 percent while revenues gained 43 percent. Revenue gains have slowed from 54.1 percent in the full year of 2013 and 69 percent in the first quarter, and Pandora predicted third-quarter revenues of $235 million to $240 million.
Listener hours topped 5 billion in the quarter, a first for the company and an increase of 29 percent form the same period a year ago, but unique listeners gained only 7.1 percent from a year ago as Pandora faces increased competition in the streaming music space. Continuing difficulty boosting the size of its audience led to shares dropping more than 10 percent after they gained 4.3 percent to $28.72 in the regular session.
"Usage is stagnating, I think that's the fundamental challenge, competition has been starting to take its toll," BTIG analyst Rich Greenfield, who pointed out on Twitter that Pandora's June listener metrics were nearly identical to December's, told Bloomberg News. "That's going to scare the market for what's supposed to be a rapid growth Internet company."
If the refrain sounds familiar, its because Pandora stock has suffered immediately after reporting financials and listening hours throughout 2014, leading to the end of monthly reports that detailed the size of Pandora's audience. Pandora said it ceased the reports because third-party measurements of Pandora's audience size had become more effective, and CEO Brian McAndrews noted in Thursday's conference call that outside metrics show Pandora has up to 8.9 percent of the overall radio market in the United States and more than three-quarters of the market for Internet radio.
"Pandora is the clear market leader in Internet radio," McAndrews proclaimed.
Pandora has suffered losses as revenues gain because the company is investing large amounts of its capital into its sales teams and other efforts to boost advertising for mobile devices and in specific local markets, where the company battles entrenched terrestrial radio stations for advertising dollars.
"Mobile advertising reached a record 76 percent of total ad revenue and local grew at 144 percent year-over-year," McAndrew heralded in Thursday's announcement.
"We expect local revenues to continue to accelerate," chief financial officer Mike Herring added in the conference call.
Executives in Thursday's conference call said that they hoped growth would come from expanded use of Pandora in cars, with the company reaching deals with more than 100 car and equipment manufacturers to put the streaming music service in automobiles, and possibly international expansion -- Pandora is currently on in the United States, Australia and New Zealand, and faces tough licensing rights in expanding to other countries.
"We have a platform that has great potential to go beyond into areas we haven't yet contemplated," McAndrews said.
SV150 market report: Amazon falls amid flood of earnings reports
Wall Street barely budged Thursday ahead of the raft of the busiest afternoon of earnings reports for Silicon Valley tech reports this quarter, as 14 other SV150 companies joined Pandora in releasing earnings reports Thursday along with one of the largest tech companies outside the region.
Amazon continued to rack up huge losses as the online retailer spends its growing revenue piles to build its business. The Seattle e-tailer lost $126 million, or 27 cents per share, in the second quarter even as sales gained 23 percent from the year-ago period to $19.34 billion. While Amazon has made a habit of racking up losses amid surging sales totals, investors still punished the company in late trading, sending shares down more than 10 percent after the stock gained 0.1 percent to $358.61 Thursday.
Riverbed Technology, which is facing a challenge from activist investor Elliott Management, reported net income of $6.8 million, or 4 cents a share, on sales of $264 million. Software company Informatica celebrated its first 12-month period of sales greater than $1 billion while reporting quarterly earnings of $22.8 million, or 20 cents a share, on sales of $250.7 million. NetGear earned $14.7 million, or 40 cents a share, on sales of $337.6 million, and Maxim Integrated announced net income of $84.8 million, or 29 cents a share, on sales of $642.5 million, results that sent shares plunging more than 13 percent in late trading.
KLA-Tencor reported net income of $129 million, or 77 cents a share, on sales of $734 million, while Altera earned $127 million, or 41 cents a share, on sales of $491.5 million. Dolby Labs reported net income of $39.8 million, or 38 cents a share, on sales of $223.4 million, and Integrated Silicon Solution earned $6.2 million, or 20 cents a share, on sales of $84.8 million. Align Technology, the San Jose-based maker of the Invisalign orthodontic system, earned $35.6 million, or 43 cents a share, on record sales of $192.5 million, and shares gained more than 5 percent in late trading.
Milpitas networking-software company Gigamon, which warned of poor results earlier this month and took a big Wall Street hit for it, showed off its actual numbers: a net loss of $32.5 million, or $1.01 a share, on sales of $34.8 million. Monolithic Power Systems earned $6.4 million, or 16 cents a share, on sales of $68.4 million, and Micrel reported profits of $3.5 million, or 6 cents a share, on sales of $62.4 million. ProofPoint lost $15.1 million, or 41 cents a share, but generated record sales of $46.4 million, and shares added more than 4 percent in late trading.
Up: Oracle, Cisco, HP, eBay, Gilead, Juniper, Yahoo, Facebook, LinkedIn, Tesla, Twitter
Down: Apple, Google, Intel, Netflix, Zynga
The SV150 index of Silicon Valley's largest tech companies: Up 8.69, or 0.56 percent, to 1,561.95.
The tech-heavy Nasdaq composite index: Down 1.59, or 0.04 percent, to 4,472.11.
The blue chip Dow Jones industrial average: Down 2.83, or 0.02 percent, to 17,083.80.
And the widely watched Standard & Poor's 500 index: Up 0.97, or 0.05 percent, to 1,987.98.
Sign up for the 60-Second Business Break newsletter at www.siliconvalley.com. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.
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