The “fiscal cliff” is to blame for Pandora’s lowered revenue guidance, not increasing competition, the company’s CEO Joe Kennedy said on CNBC’s “Squawk on the Street” on 12/5.
The fiscal cliff of automatic spending cuts and tax increases set for the end of the year may cause advertisers to be more cautious in their spending which could hurt Pandora’s revenue, Kennedy said: “We have concern that the Q1 spending by advertisers may be unusually back-weighted into February and March this year.”
Pandora’s shares fell as much as 22% in after-hours trading on Tuesday, 12/4 as the company forecast the fiscal Q4 loss, excluding one-time items, of between 6 cents and 9 cents a share, on revenue between $120 million and $123 million. Analysts had forecast Pandora to earn a penny a share on sales of $130.2 million for Q4. The stock was down on Wednesday as well.
Pandora’s fiscal Q4 ends 1/31, making the company “unusually sensitive” to ad spend in the first quarter because of fiscal cliff fears, Kennedy added. “Even at the reduced revenue guidance for the current quarter, we’re looking at just under fifty percent year-on-year growth in revenue,” he said, discussing how the fiscal cliff has impacted his company’s earnings, with CNBC’s Julia Boornstin.
While Kennedy blamed the federal deficit for its stunted revenue growth, growing competition may also be weighing on the company. Reports indicate that Apple may launch a radio service this year which would directly compete with Pandora’s service.
Kennedy, though, said he is not worried about what Apple plans to do: “I think only Apple knows what Apple is going to do. What we are focused on everyday is delivering the best personalized radio in the world. We’ve delivered that, we’ve met every competitor that has entered the market and our share of Internet radio has only grown over time,” CNBC aired him saying.
RBR-TVBR observation: It may be a bit of a stretch from Kennedy. Rich Russo, JL Media’s SVP/Director of Broadcast Services, tells RBR-TVBR with a bit of sarcasm on top: “We have not had any client be hesitant of any future advertising due to the potential of the so-called ‘fiscal cliff’.”