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Apple Music Rival Pandora Spending More To Boost Its ‘Lean Forward’

Pandora Media ( P ) is spending big as it digests its $75 million purchase of Web-streaming service Rdio, said investment bank Needham, which on Wednesday significantly lowered its 2016 EBITDA estimate for the No. 1 music streaming service. Pandora stock has sagged since the June launch of Apple ( AAPL ) Music — a service combining paid subscription music streaming with a 24/7 live global Internet radio station. While Pandora remains the Internet streaming leader, its market share is falling as competition grows. Pandora stock was down almost 3%, below 10, in late-afternoon trading in the stock market today . Besides Apple Music, Pandora is also in a heated battle with rivals including Spotify, iHeartRadio, Amazon.com ‘s ( AMZN ) Amazon Prime Music and Google Play Music from Alphabet ( GOOGL ). Needham analyst Laura Martin cut her 2016 EBITDA (earnings before interest, taxes, depreciation and amortization) estimate for Pandora to “negative $70 million” from her prior positive $50 million. “The gap downward is largely due to $50 million extra research-and-development spending for a new on-demand service, $30 million for Rdio employees (mostly engineers) and $40 million to market/launch a new on-demand service,” Martin wrote in a research note. “By implication, about $90 million of spending might get pushed into next year if Pandora can’t complete agreements with all record labels by Q3 2016.” Pandora posted an EBITDA loss of $31.1 million in 2015, according to Needham, down 57% from $72.5 million in 2014. “Recall that today Pandora competes in the 80% of the market that is ‘lean back,’ ” said Martin, referring to curated versions where the music-streaming service picks the tunes listeners hear. The remaining 20% is “lean forward,” she said, a term referring to more personalized music that “Pandora is investing in during fiscal year 2016 in order to create an on-demand service similar to Spotify.” Needham maintained a buy rating and 12 price target on Pandora stock. Pandora bought Ticketfly for $450 million in October, vaulting the online music-streaming leader into the live-event and ticket sales business. The company completed its purchase of Rdio in December. Overseas expansion will likely take center stage in 2016, analysts say. Pandora’s biggest rival outside the U.S. is Spotify, which is in more than 60 markets. Besides the U.S., Pandora operates only in Australia and New Zealand, launching in those markets in 2012. Pandora must pay to acquire music rights country by country, which can significantly add to its already heavy spending on music-acquisition costs. Pandora reported a fourth-quarter earnings miss in February, as its active listener base fell and acquisitions and other costs took a toll.

Apple Vs. FBI: Israeli Firm Reportedly Will Unlock iPhone

In a bid to unlock the Apple ( AAPL ) iPhone belonging to one of the San Bernardino, Calif., shooters, the FBI has turned to Israeli digital forensics firm Cellebrite, according to a number of media reports Wednesday. Reuters said that the Yedioth Ahronoth newspaper in Tel Aviv was the first to report that Cellebrite was working with U.S. law enforcement to unlock the device. Cellebrite provides mobile forensic software. Executives at Cellebrite and Apple have declined to comment on the reports. So have FBI officials. Apple is engaged in a legal battle with the U.S. Justice Department over a judge’s order that it write new software to disable pass-code protection on the iPhone that the shooter used. The ensuing legal fight has become a lightning rod for a broader debate on data privacy vs. security. Led by CEO Tim Cook, Apple had refused to create code to unlock the phone, saying that doing so would create a “back door” to bypass its security protections and thus threaten the personal data of millions of iPhone users. Apple says that the government is overstepping its bounds by ordering Apple to unlock the phone. But the case between Apple and the FBI could come to an abrupt end if Cellebrite can unlock it. Apple and the FBI were set to face off in court on Tuesday, but on Monday a federal judge agreed to the government’s request to postpone the hearing after U.S. prosecutors said that a “third party” had presented a possible method for opening an encrypted iPhone without Apple’s help. Cellebrite signed a sole-service contract with the FBI in 2013 to provide data-extraction service, according to Buzzfeed . Cellebrite says on its website that it can obtain data from Apple phones that use the iPhone’s most recent operating system. A case study on the Cellebrite site shows that the company has worked with U.S. law enforcement to unlock phones, including an LG phone for the Tacoma, Wash., police department. A subsidiary of Japan’s Sun Corp., Cellebrite has its revenue split between two business segments: technology for mobile retailers and a forensics system that law enforcement, military and intelligence use to retrieve data hidden inside mobile devices, Reuters said.

Square, Facebook Partner To Bring Ads To Small Businesses

In a blog post Wednesday, digital cash register and payments processor Square ( SQ ) announced that it would integrate Facebook ( FB ) ad buying into its small-business software. The new integration will enable merchants using Square software to buy and target Facebook ads, aiming to help the merchants understand the effectiveness of online ad campaigns on the social network. Square will earn a subscription fee. “There’s a lot of excitement around buying Facebook ads, but the critical missing link is: If I put down $5, how do I know if it worked?” Saumil Mehta, Square’s customer engagement lead, told the New York Times . “The ability to track and close the loop from advertisement to sale — that’s the holy grail.” The company offers a range of digital cash register hardware as well as software that performs marketing tasks. The company’s financial business offers small-business loans — it assesses risk based on the wealth of transaction data it accumulates — and other financial services such as payroll. It also does payments processing — a business that some analysts and investors have criticized for having tight profit margins. Square must share its transaction fees with credit card firms and other financial institutions. Square also has a peer-to-peer payments app called Square Cash that competes with PayPal ( PYPL ) and its offering, Venmo. CEO Jack Dorsey is also CEO of Twitter ( TWTR ), which is based about a block away from Square’s offices in San Francisco. Square stock was down 4%, near 12.50, in afternoon trading on the stock market today but rose earlier to a four-month high of 13.80. The company has an IBD Composite Rating of 46, where 99 is the highest, and its November IPO generally disappointed. Shares priced at 9, peaked at 14.05 the first day and have mostly lagged ever since. Wedbush analyst Gil Luria warns that the stock is volatile because it has a large number of short sellers betting on the stock to fall, as well as a small float. Company insiders, including early venture capital investors who can’t sell until May under the IPO’s lock-up provisions, hold a significant number of shares. Square beat Wall Street expectations for Q4 sales in the company’s first release since going public in November. Executives have said that the company will turn profitable this year. In 2015, the company’s losses widened to $179 million from $154 million in 2014.