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Fiscal Worries Have Pandora Cautious About Next Quarter

Even as Internet audio service reports net profit in Q3, it’s lowering predictions for Q4

Internet radio company Pandora reported a third-quarter net profit of $2 million. However, the company predicted a loss in the fourth quarter as advertisers typically pull back spending at year-end combined with so-called “fiscal cliff worries” when tax increases may take effect.

Pandora’s fourth quarter ends Jan. 31, 2013.

Pandora CEO Joe Kennedy told Wall Street analysts in an earnings call, “Many of our advertisers have become more cautious about their near-term spending.”

Revenue rose 60% year-over-year to $120 million, higher than the $117 million expected by analysts.

Notwithstanding, the company predicted a loss in the fourth quarter of between 6 cents and 9 cents per share, compared to the penny per share loss anticipated by analysts.

The company continues to focus on growing its mobile listening, and said listener hours in November rose 58% from a year ago to 1.27 billion, while the number of active listeners grew 45% to 62.4 million. Its share of radio listening hours in the U.S. rose to 7.09% from 4.32% a year ago.

Pandora continues to add salespeople to sell against traditional radio in the top local markets. The company is approaching 100 ad sellers, which Kennedy acknowledges is the half-dozen to a typical market the average radio group owner has. “We know how to hire the right people,” said Kennedy, who added the company is positioning itself to take a larger share of the radio advertising market pie.

Asked how the company feels about last week’s congressional hearing before a subcommittee of the House Judiciary Committee on music royalties for streamed audio services, Kennedy said Pandora was pleased there was a hearing in the midst of this lame-duck session of Congress. “We’re aware there’s no assurance of any bill getting passed,” he said, referring to the Internet Radio Fairness Act. Pandora supports the measure to level the playing field for music royalties paid by digital radio services. The company was pleased to get the attention of key members of Congress on the issue, he said.