(By Balachander) Pandora Media Inc. (NYSE:P) shares plunged on Friday amid investor concerns that Apple Inc. (NASDAQ:AAPL) may launch a competing streaming-radio service.
Apple is in negotiations to create its own streaming radio service similar to the one operated by Pandora, the Wall Street Journal reported, citing sources close to the matter.
Pandora, which made its public debut last year with a IPO price of $16, has roughly 55 million active users. Its online streaming music service allow users to create their own radio stations based on their music preferences. iDevices and Macs have spurred Pandora's usage of late.
The company is facing intense rivalry from other internet streaming radio services such as Spotify and Songza. Songza continues to gain users and positive feedback due to its simplicity and focus on mobile. Currently the Songza app has a perfect 5 star rating in the iOS app store and has added about 2 million users since June 1. Also, Spotify's app, which includes free radio, has 4.5 stars in the app store and is now consistently ahead of Pandora.
"Apple's outsize presence in online-music sales and massive installed base of MP3 players, smartphones, tablets and computers could make it a much more serious threat to Pandora than any of its current would-be rivals," according to the WSJ report.
Analysts are of the view that the Apple radio report is likely to hit Pandora shares "for the foreseeable future."
According to a report from eMarketer, Pandora Media has emerged as one of the strongest US mobile display ad sellers on a net basis, and its share of the total U.S. mobile display market is expected to reach 20.5 percent in 2012. The research firm expects Pandora to earn 8.7 percent of U.S. mobile ad revenues this year.
Last week, the Internet radio services company posted better-than-expected quarterly results and issued an upbeat forecast. On a non-GAAP basis, Pandora reported breakeven earnings amid 51 percent jump in revenue. Its net loss widened as jump in expenses offset revenue growth. Total listener hours grew 80 percent to 3.30 billion in the second quarter.
Pandora forecasts non-GAAP earnings per share to be between breakeven and $0.01 on revenue of $115 million to $118 million for the third quarter.
On Friday, shares retreated 17.66 percent, or $2.22, to trade at $10.35 at 1.16 pm ET. Over the past year, the stock has been trading between $7.83 and $15.98.