Pandora shares were up more than 20% Friday morning after the company reported better than expected earnings, which is why many are surprised by the sudden announcement that CEO Joe Kennedy is stepping down after nearly a decade on the job.
“As I near the start of my tenth year at the helm of Pandora, I am incredibly proud of the team and what we have accomplished in redefining radio. As part of our Board discussions of the road that lies ahead, I reached the conclusion and advised the Board that the time is right to begin a process to identify my successor,” said Kennedy, in a statement. “There is a tremendous market opportunity ahead and I look forward to continuing to work with all the great people at Pandora to keep driving the business forward.”
The announcement was made the same day that Pandora released its Q4 2012 earnings, revealing a narrower than expected loss of $0.04 per share, beating analysts’ expectations of $0.05 per share. Revenue also beat expectations with $125.1 million for the quarter, a 54% increase over the same quarter last year. Wall Street had pegged revenue at $122.8 million.
Total revenue for 2012 was $427.1 million, of which $255.9 million was mobile revenue.
Kennedy took over the role of CEO from founder Tim Westergren in July 2004 and led the company through its highly successful IPO. The company’s stock has since had a rocky ride, falling as low as $7.18 last November, but as of Friday morning, shares have rebounded some 90% to $13.60 as of 8 am PT.
Pandora has been struggling to monetize mobile usage for a while, and last month, the company announced it would be capping mobile usage hours to 40 hours a month, after which users can pay $0.99 for unlimited streaming for the rest of the month. Or they can subscribe to unlimited, ad-free streaming for $3-$4 a month. As Doug Anmuth of J.P. Morgan noted, when Pandora instituted its hourly cap on desktop usage, listener hours stabilized and then dropped a bit before rising again, which will likely happen with the new mobile cap as well. But in the long run, it will benefit the company.
“We think it's the prudent approach for the company as it continues to balance strong hours growth and radio market share gains with profitability in the face of escalating content costs,” wrote Anmuth.
The company revealed Thursday that total listener hours increased to 4.05 billion for the fourth quarter, a 53% increase over the same quarter last year when listener hours reached 2.66 billion.