Biz Break: Who might buy ‘flawed’ Pandora?

Top Of The Order:  

So, How Do You Really Feel?:  Well, when you start off by saying you think something is “fundamentally flawed,” you pretty much set the tone for your opinion on that topic. And on Wednesday, the person giving that opinion was BTIG analyst Brandon Ross, who then set upon describing his thoughts about the pride of Oakland, online radio leader Pandora Media.

For those who might have missed some of what’s been going on with Pandora, here’s a refresher course on what has happened with the company this year:

  • In an unexpected move in March, Pandora Chief Executive Brian McAndrews left the company and was replaced by founder Tim Westergren.
  • Pandora was said to have held talks with investment bankers about options such as potentially putting itself up for sale.
  • Westergren outlined a company plan to launch a subscription streaming service reach $4 billion in annual revenue by 2020, and said he had “never been more clear” about Pandora’s purpose.
  • In May, the company’s single-largest shareholder, Corvex Managagement, called upon Pandora to explore selling itself. Corvex, which owns 9.9 percent of Pandora’s outstanding shares. Corvex issued a letter that basically refuted everything Westergren has tried to implement since his return to Pandora’s CEO spot.

So, with all of this going on, BTIG’s Ross said in a research note Wednesday that “Pandora appears to have recognized the lack of viability of its core business,” and that while he believes Pandora has a good strategy, in theory, it “will not work in practice.”

Ross cited concerns about Pandora’s Ticketfly concert-ticketing business gaining traction against Ticketmaster, and whether Pandora’s upcoming subscription-streaming offering will be able to compete with more established rivals such as Spotify, Apple Music and even Amazon, as reasons for the company’s uncertain future.

Then what should Pandora do?

[graphiq id=”18bTznVVATr” title=”Pandora Media Inc. (P) Stock Price” width=”600″ height=”628″ url=”https://w.graphiq.com/w/18bTznVVATr” link=”http://listings.findthecompany.com/l/11470696/Pandora-Media-Inc-in-Oakland-CA” link_text=”Pandora Media Inc. (P) Stock Price | FindTheCompany” ]

Ross believes the company should take its 80 million monthly average users and “be acquired by a larger organization.”

Among the companies Ross said could be interested in Pandora are iHeartMedia (formerly Clear Channel). Ross said iHeartRadio would be able to leverage Pandora’s sales efforts, but that the company has too much debt already to make buying Pandora feasible.

Another potential acquirer could be Liberty Media, which already owns a controlling stake in satellite radio company Sirius XM. Ross said that since talk about Pandora possibly being on the market has emerged, Liberty “has appeared to have the most interest” in acquiring Pandora, and it’s possible Liberty CEO Greg Maffei is waiting for more shareholder pressure to build on Pandora to explore a sale.

And those shareholders may be getting a little antsy. Because of the size of its Pandora stake, Corvex’s call for the company to look at selling itself is going to weigh on investors’ minds and sentiment. Pandora shares closed Wednesday at $11.76, and are down 12 percent for the year, and off by almost 30 percent over the last 52 weeks.

For a company that prides itself on playing the music best-suited to its listeners’ tastes, Pandora’s stock market performance isn’t going to get many thumbs up from its investors. If it doesn’t start rewarding its shareholders’ patience soon, the next tune it might play will be the song of surrender.

Middle Innings: 

Tesla Gets Burned: It was hard to miss what was going on with Tesla on Wednesday, one day after the Elon Musk-led electric car maker made a $2.8 billion offer to acquire SolarCity, the sort-of-Elon Musk-solar panel technology company. For those who don’t know, Musk is CEO of Tesla and chairman and co-founder of SolarCity. Tesla shares fell 10.5 percent Wednesday as many investors questioned the motives behind Musk’s madness intentions.

No Abiding Adobe: While all that was going on with Tesla and Pandora, Adobe Systems slipped out its latest quarterly results late Tuesday. And, well, the market didn’t like Adobe’s views.

Adobe shares fell 5.7 percent to close Wednesday at $94.01 after the digital-media software maker reported a second-quarter profit of  71 cents a share on revenue of $1.4 billion, while Wall Street analysts forecast a profit of 68 cents a share on $1.4 billion in sales. However, Adobe gave a mixed third-quarter outlook, as it forecast earnings of 72 cents a share on $1.45 billion in sales. Wall Street analysts that follow Adobe had forecast the company to earn 71 cents a share on $1.47 billion in revenue.

Bottom Of The Lineup:

Here’s a look at how some leading Silicon Valley stocks did Wednesday…

Movin’ On Up: Gains came from Impax Laboratories, VeriFone Systems, Gigamon, SolarCity and Sanmina.

In The Red: There was Tesla, which, again, fell 10.5 percent on the day. Other losses came from Advanced Micro Devices, Adobe Systems, Rovi and HP Inc.

The tech-focused Nasdaq Composite Index slipped by 0.2 percent to 4,833.

The blue chip Dow Jones Industrial Average gave up 0.3 percent to close at 17,780.

And the broad-based Standard & Poor’s 500 Index ended the day down by 0.2 percent at 2,085.

Quote Of The Day: “In the chaos and hubbub, how are you going to remember one guy when you haven’t seen him for 40 years?” — Robert Plant, while testifying on Tuesday in the copyright infringement suit against he, Jimmy Page and Led Zeppelin’s record label over the song “Stairway to Heaven.” Jury deliberations in the trial began Wednesday afternoon.

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Photo: The building that houses the Oakland headquarters of Pandora. (Doug Duran/Bay Area News Group)

 

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  • bianca hunt

    Maybe if Pandora had more music they’d be better off. They also need to stop turning down artist submissions and let the listeners decide if they want to hear a particular artist. It’s nearly impossible to discover a new artist on Pandora.

    • tiabgood

      I thought they bought rdio for the music licensing. Now I am curious as to what the dealio is.

 
 
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