Does This Spell BAD NEWS for Pandora?

What a difference an extended holiday weekend can make. Last week, Pandora Media Inc. (NYSE:P), which provides a personalized radio that plays music across several platforms, announced better-than-expected first-quarter numbers. As a result, shares surged 12 percent in a single-day. However, much of the gains were quickly erased on Tuesday, as more competition enters the music market.

South Korean multinational conglomerate Samsung just released its new smartphone in Europe, the Galaxy S III. The new product comes with a service called Music Hub, which allows users to upload and stream music from the cloud, or for 9.99 euros a month, users can stream music from a 19 million song catalog. Music Hub is the first time Samsung has created its own music service from scratch and is a clear shot across the bow of Apple Inc. (NASDAQ:AAPL), Google Inc. (NASDAQ:GOOG), Spotify and Pandora.

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T.J. Kang, senior vice president of Samsung Electronics’ Media Solution Center, explained, “Samsung is not known for our content services; we make good hardware products but we haven’t done much in the content space but that’s changing. We are doing it to create a better experience for our users. There are things we could do better if we have complete control over all of the service.”

Popular internet names such as Facebook (NASDAQ:FB) and Zynga, Inc. (NASDAQ:ZNGA) closed sharply lower on Tuesday, but Pandora was the biggest loser of the day. Investors were unable to tune out more competition being announced in the digital music space, as shares of the company dropped more than 10 percent. Although Samsung’s new Music Hub is unlikely to be an iTunes killer, it does serve as another competitor and adds more uncertainty to already volatile names such as Pandora.

Pandora (NYSE:P) recently reported a loss of $20.2 million for the first-quarter, compared to a loss of $6.8 million a year earlier. Total revenue for the company jumped 58 percent year-over-year to almost $81 million. For the full year fiscal 2013, Pandora (NYSE:P) expects total revenue to range from $420 million to $427 million, up from the previous guidance of $410 million to $420 million.

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