Pandora Media Inc. CEO Joseph Kennedy is stepping down and the search for a replacement has begun, a surprise announcement that came the same day the Internet music service reported stronger-than-expected quarterly results.
Shares of the company, the leader in Internet-streaming radio, leapt 20 percent immediately after it reported results and forecast better-than-expected revenue for the first quarter of fiscal year 2014.
Kennedy departs as Pandora is gaining market share and growing revenue, but still struggling to expand its profit. The company also has to grapple with intensifying competition from current rivals Sirus XM Radio and Spotify, as well as potential future entrants such as Apple Inc.
"As I approach the start of my tenth year, my head is telling me to get to a recharging station sooner rather than later," Kennedy, who has a background in the automobile industry, told analysts on a conference call.
Kennedy, a former auto industry executive who confesses on his Pandora profile to being a pop music junkie, has led the company since July 2004. He will remain in his current role until the board names his successor, Pandora said.
The Oakland, California-based company said that mobile revenue, an important metric, more than doubled to $80.3 million for the fourth quarter.
It reported a quarterly loss of 4 cents per share, compared with a loss of 3 cents per share in the same quarter a year ago.
Pandora said it expects revenue in the first quarter of $120 million to $125 million, surpassing analysts' expectations of $119.5 million.
The company said fourth quarter revenue rose 54 percent to $125.1 million. Analysts were expecting $122.8 million, according to Thomson Reuters I/B/E/S.
Pandora's shares rose to $14 in after-hours trading. They closed at $11.73 on the New York Stock Exchange.
Last week, the Oakland, California-based company said it would cap free mobile listening at 40 hours per month as it tries to overcome rising royalty costs.
Analysts believe the company capped mobile streaming because while its mobile advertising sales continue to rise, it is behind rising royalty payment costs.
For the past decade, Pandora has been gaining market share as it becomes more popular. But as it attracts more listeners, Pandora has to pay more to license music.
Pandora's per-track royalty rates have increased more than 25 percent over the last 3 years, including 9 percent in 2013 alone and are set to increase an additional 16 percent over the next two years, co-founder Tim Westergren wrote in a blog posted last week on the company's website.
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