These 2 Companies Will Never Turn a Profit

Probably the most important lesson we learned from the Internet bubble of 1999-2001 (other than the fact that Pets.com was a terrible idea) was that rapidly rising revenue is meaningless if there's little hope of a profit on the horizon. The majority of dot-com companies went belly-up once investors realized there was nothing to sustain already-inflated prices.

Fast-forward to 2011, and we are arguably on the precipice of another potential bubble -- this time from social media and newer technologies. Unlike 1999, many of these companies at least have revenue and have some idea of when they expect to be profitable. Still, some recent companies are exhibiting plenty of growth, but I'm extremely skeptical as to whether they will ever turn a profit. Let's take a look at two potentially troubling candidates.

Pandora Media (NYSE: P  )
Pandora Media is all the rage because it has a rapidly expanding subscriber base and presents the only true challenge to Sirius XM's (Nasdaq: SIRI  ) music dominance. Despite my long-running denial that Sirius XM would ever be profitable, the company now is, and it's now Pandora that looks like it may wind up the perpetual loser.

Pandora Media isn't lacking revenue or subscriber growth, logging a 136% jump in revenue and a near doubling of subscribers from 18 million to 34 million in its most recent quarter. The company generated 86% of its revenue from advertising with the remaining 14% coming from ad-free premium subscriptions. But more importantly, losses are increasing -- a trend that has been prevalent since Pandora was founded 10 years ago.

Working against Pandora are the steadily increasing royalties from the music industry and the higher costs associated with being a publicly listed company. Currently, Pandora is paying out approximately half of its revenue in the form of royalties, and that trend is likely to continue. It's very unlikely that Pandora will be able to break itself free from rising royalty costs, and even if it can, legal fees will pick up where the royalty fees left off. I don't see how Pandora will ever turn a profit.

Tesla Motors (Nasdaq: TSLA  )
I'm no dummy; I know this is going to be an extremely unpopular opinion, especially with the Model S electric vehicle due out by mid-2012, but I just can't see Tesla turning a profit anytime soon -- if ever!

First of all, Tesla is facing some major competition in the form of Nissan's Leaf, Ford's (NYSE: F  ) electric Focus, General Motors' (NYSE: GM  ) hybrid Volt, and Honda (NYSE: HMC  ) entering the electric car free-for-all. Just because Tesla was one of the first car companies capable of producing electric vehicles at a rapid rate doesn't guarantee the company success.

Current analyst projections call for Tesla to grow revenue by threefold in 2012 with the introduction of the Model S, but call me not so convinced. On countless occasions in recent history, Tesla has run into parts supply delays and technical snafus. Let's just say I wouldn't be shocked to see the debut of the Model S pushed back beyond the mid-2012 date the company provided.

Then there's the company's debt, which will begin to be addressed in 2013. Based on loans from the Department of Energy in January 2010, Tesla will need to begin making quarterly payments on its debt in 2013 that should amount to roughly $12 million per quarter. That may not sound like much, but these interest payments could be enough to keep the company unprofitable even if the company is able to sell 20,000 EVs each year.

Foolish roundup
Pandora and Tesla boast market values of $2.8 billion and $2.9 billion, respectively, and if history repeats itself these two companies may find their bubbles bursting sooner than later. While I don't have a crystal ball, I do have plenty of facts and history to stand behind these claims.

What's your take? Share your thoughts in the comments section below and consider adding Pandora Media and Tesla Motors to your watchlist to see if my prediction holds water.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that'll never go belly up on you.


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  • Report this Comment On June 29, 2011, at 12:42 PM, bottomfisherman wrote:

    Right on Sean on both of these companies. Wow I do not beleive it. I am beginning to agree with you Anders and Seth on some of these companies. Will miracles never cease ha ha ha.

  • Report this Comment On June 29, 2011, at 1:04 PM, doubting wrote:

    Sean,

    It is very honorable to acknowledge your mistakes. However, if I were you, would make one more step and assess how HUGELY PROFITABLE Sirius XM is going to be. If you do not see that now, you are still making a big mistake and will have to apologize again. Why not save anohter apology and do a fair analysis of the company growth, say, for the next three years. Sirius XM is going have the largest margins in its industry and principle.

  • Report this Comment On June 29, 2011, at 1:09 PM, ccs2a wrote:

    "Despite my long-running denial that Sirius XM would ever be profitable, the company now is,"

    How can your article be even remotely credible, when in the first paragraph about Pandora, you state you were completely wrong about the profit potential of SIRI? But, after that resounding error in judgement, you now place the same issue with Pandora? What about the very obvious? Pandora finds a way to sell more profitable advertising? Or if subscription rates go up enough to outpace royalties? What if pandora starts new channels with exclusive content (i.e. Stern, or other talk radio, etc...).

    It's completely short sighted to think that a company that's growing at a 100% year over year clip has no potential to be profitable.

    Yes, I own some Pandora - and yes, I think it's crazy expensive here. However, so was Amazon all throughout it's life, and it took it over 7 years to turn a profit - now it's doing great.

  • Report this Comment On June 29, 2011, at 1:25 PM, latinoeconomist wrote:

    These are two of my few "shorts" in CAPS. I don't see them making profits ever.

  • Report this Comment On June 29, 2011, at 1:30 PM, barbarian312 wrote:

    As a SIRI owner who is finally in the black, I'm glad you were wrong on that one and, while I agree with your assessment of Pandora, I have learned to never underestimate the American people's desire to be entertained.

    As for Tesla, If you notice, the major competition you mentioned did not include Toyota and they already own $50 mil worth of Tesla. I have a feeling they may end up as more than just friends.

  • Report this Comment On June 29, 2011, at 1:30 PM, muchohobbies wrote:

    This analysis of Tesla seems to have completely forgotten about Tesla's strategic alliances with Daimler and Toyota. Even if the the Model-S (and their SUV, the Model-X) do not get them to profitability, there are huge opportunities at Toyota, Daimler and possibly other manufacturers for Telsa's battery and drive train technology. As for the Nissan Leaf and Ford Focus....that's a bit like comparing a Corolla to a BMW M series. They're both great cars, but do they really compete with each other? And finally, let's not forget that soon Tesla will be an incredible acquisition target. I think the stock is headed way up.

  • Report this Comment On June 29, 2011, at 1:37 PM, waterinfo wrote:

    I can't believe the runup of P over last few days. There has to be some kind of manipulation going on behind the scenes, as the market reaction after the first day of trading (which clipped investors at the high by 50%) was an accurate reflection of the lack of value in this company.

    Pandora is doomed to failure because it has no control of its delivery mechanism, and in fact the delivery of its product will eventually cost much more than the product itself. Its business model is vague at best, and its business is not unique and it is easy to duplicate and imitate by competitors.

    A regular radio station has an FCC licensed channel, and has no further cost for delivery of its programming (beyond maintenance and electricity for its transmitter).

    SiriusXM has FCC licensed channels, government approved orbital slots, and has paid for satellites to provide the delivery mechanism for its programming. The costs, mostly sunk costs at this point, are known, predictable, and are essentially independent of the number of users. The company has complete control of its own delivery mechanism.

    Internet radio, as a separate service, like Pandora, is totally, TOTALLY, TOTALLY dependent upon a third party for delivery of its product. The Pandora customer must ALSO be a customer of a wireless internet service, with its own profit motive, and the Pandora customer is paying for that service many times more than the SiriusXM monthly cost.

    Moreover, the cost of the delivery mechanism, being far more than the cost of the content (which allegedly is free), is very likely to become totally volume dependent over the next year or two, especially for high volume users like radio listeners. This will result in an effective hourly cost to listen to "free radio" of somewhere, according to my calculations between 7 cents and 50 cents per hour, possibly much more in some scenarios. Home much money would Domino's make if the delivery cost of its $10 pizza were $100. In addition, the delivery mechanism for Internet radio from a fidelity, quality, and coverage perspective is far inferior to direct broadcast satellite.

    Pandora and its brethren are the dot.com bust companies of our current era. There were hundreds of such companies founded in the mid-to-late 1990's that raised millions and billions in IPO capital and promptly flushed it down the toilet. Pandora will join them.

  • Report this Comment On June 29, 2011, at 2:08 PM, Rut67 wrote:

    Pandora is a 50 cent stock. When the CEO says he "Respects margin and cash flow" but has never achieved positive results in either area and never will, you have a disaster in the making. Pandora's business model is unworkable.

  • Report this Comment On June 29, 2011, at 3:01 PM, Billiardman wrote:

    Pandora is literally a born loser. With no barrier to competition, the company is doomed.

    Tesla on the other hand, has a chance. The one thing that you've overlooked is advancements in batttery technology. If the technology advances significantly in the near future, Tesla can be a profitable company...at some point.

  • Report this Comment On June 29, 2011, at 3:46 PM, ramon123 wrote:

    Tesla only needs to sell half as many Model S

    sedans as they plan in order to become profitiable.

    Betting against them when they've already sold out their first year's production doesn't seem a wise move. I'm amazed at the ignorance displayed by this article.

  • Report this Comment On June 29, 2011, at 3:50 PM, ramon123 wrote:

    I love the way Motley Fool covers their ass. One article about Tesla is positive, the next is negative.

    Regardless of what happens to Tesla, Motley will claim to have been right. This is why I never pay attention to this website, except for amusement.

    I wonder if this negative piece is designed to

    affect Tesla's upcoming IPO prices? Gee, Motley wouldn't do anything like that, now would they?

    I would like to know how many folks at Motley will participate in that IPO. Fat chance they'll fess up.

  • Report this Comment On June 29, 2011, at 4:23 PM, matav wrote:

    "I wonder if this negative piece is designed to affect Tesla's upcoming IPO prices? Gee, Motley wouldn't do anything like that, now would they? I would like to know how many folks at Motley will participate in that IPO. Fat chance they'll fess up."

    ramon123 - What are you talking about? TSLA IPO was in June, 2010. The secondary offering they just floated was completed a few short weeks ago. Both offerings were oversubscribed.

  • Report this Comment On June 29, 2011, at 4:47 PM, n8larson wrote:

    Tesla might take a while to be profitable, but never's too strong a word. If the cars turn out to be reliable and perform well, they have a good shot at scaling up to profitable sales levels, especially with Toyota looking over their shoulder.

    -n8 (no positions)

  • Report this Comment On June 29, 2011, at 6:44 PM, warrenrial wrote:

    Pandora has plenty of room for growth.

  • Report this Comment On June 29, 2011, at 6:50 PM, dinosaurworld wrote:

    I am willing to bet that 99% of people who trash Pandora on this site have never used it, or if they have they only took a cursory glance. Everyone 35 or under listens to it. Walk into a party Pandora's on, go to a bar/restaurant, Pandora's on. Going on a road trip, Pandora's on. If you want to listen to music on the radio, it's your best option. Way better than terrestrial radio and better still than SiriusXM. There are literary thousands of channels.

    They may need to get their financial house in order, but it's a good product. Let's not forget the music industry has experienced a huge fallout in the last 10 years, and, except for Apple which benefits from complementarities, a profitable, stable business model for the industry has not yet emerged. I wouldn't count them out so soon.

  • Report this Comment On June 29, 2011, at 8:11 PM, jagman55 wrote:

    One important element missed in the Tesla comparison against the Big auto makers. The big auto makers electric cars can make you gag if you look at them too long. In the old days, we called them 'committee cars" or those designed in pieces by hundred designers who never talked to each other. Then someone had to put all the pieces together to see what the car would look like and it did not look like a Ferrari, it looked liked a old Volvo. So the big auto makers still make committee cars and they are at best, ugly, ugly, ugly, and Tesla's are not.

    The only decent looking hybrid or electric was Honda Insight from 2000-2006.

  • Report this Comment On June 29, 2011, at 11:11 PM, CVMp wrote:

    Water infor said...

    "The Pandora customer must ALSO be a customer of a wireless internet service, with its own profit motive, and the Pandora customer is paying for that service many times more than the SiriusXM monthly cost."

    Not true. I listen to Pandora at work with zero cost and no WiFi. My XM radio tries to charge me for internet access in addition to the $12 or so I pay them a month.

  • Report this Comment On June 30, 2011, at 12:04 AM, jekoslosky wrote:

    I can't say I'm surprised by the run-up on Pandora. Momentum investors don't care if the company ever makes a dime. There's money to be made in the short-term trade as long as you don't stay in too long.

    Think about the dot-com bubble. A lot of people made money on those trades before the stocks came crashing down.

    Not all dot-coms were destined to fail. But it took years for some successful ones to establish a good working business model.

    Take a look at Priceline.com, now a great stock with solid earnings and growth.

    It's stock sold initially for somewhere around $480, I think.

    Went up to near $1,000. Crashed to a couple bucks,

    Over years, however, the company established itself. I'd rather wait to see what a company can do rather than play Russian roulette.

    More on that here: http://bit.ly/lUWt2C

  • Report this Comment On June 30, 2011, at 1:12 AM, TMFUltraLong wrote:

    ccs2a,

    The worry I have is that no matter how rapidly Pandora raises its revenue, the music companies will always come after more in royalties on a sliding scale. It really is a no-win situation for Pandora.

    TMFUltraLong

  • Report this Comment On June 30, 2011, at 1:14 AM, TMFUltraLong wrote:

    ramon123,

    The figure I heard from Tesla is the company needed to sell 20k Model S to be profitable, but considering their forecasts have been sketchy at best since their IPO I'm not exactly chomping at the bit to believe them.

    One thing I didn't even go into is the infrastructure needed to run an electric car. Sure you just need a standard plug-in, but have your local shopping centers (or anywhere other than universities) made it friendly for you to bring an EV out on the streets? I'd say no. So without the infrastructure there to build up a customer base I just don't see profitability on the horizon.

    TMFUltraLong

  • Report this Comment On June 30, 2011, at 6:15 AM, dude10000 wrote:

    Hi,

    I believe this author/investor is unhappy that these two stocks are priced the way they are and wrote this article to drive the price down so they could buy in later when the price is lower. He is probably kicking himself in the groin for not getting in sooner.

    That is my 2 cents and I have done well investing over the past 2 decades. Many many authors/investors do this in hopes to drive the price down. Wake up people-articles like this are price manipulation. Yes high prices on the stocks are idea prices and not reality prices but just look at lnkd. That price is crazy high based on speculation...but it is holding. Buy low and sell high. I just bought 30,000 shares of aapl.

  • Report this Comment On June 30, 2011, at 6:19 AM, skypilot2005 wrote:

    On June 29, 2011, at 3:50 PM, ramon123 wrote:

    "I love the way Motley Fool covers their ass. One article about Tesla is positive, the next is negative. "

    I like seeing both "sides". Whether in the same article or 2.

    Sky Pilot

    I used to own SIRI but, sold at a profit awhile ago to free up cash for other opportunities. This is the first I've heard of "P". I have no opinion on either, now.

    Sky Pilot

  • Report this Comment On June 30, 2011, at 9:44 AM, Rut67 wrote:

    The cost of growth at Pandora is more than the revenue it receives. It's a continuing downward spiral. Pandora management is clueless. Bankruptcy within three years.

  • Report this Comment On June 30, 2011, at 12:52 PM, EquityBull wrote:

    Both Pandora and Tesla won't be around in 3 to 7 years.

    Pandora has no business model to propel them to profitability and too much competition.

    Tesla won't sell enough cars. It is just a vehicle for Musk's fame seeking. He can raise money from a stone. Keep in mind to date Chevy has sold LESS then 500 Volt's. You cannot build a business when people are not willing to pay up for your product en masse. Too much cost for development and mfg.

    The writer is correct and also the reason why I have not touched either of these co's and won't. Plenty of other great stocks out there trading at huge discounts with long standing brand loyalty. Apple for one comes to mind. Trades at a paltry PE, the #1 balance sheet in the world literally and growing faster then 90% of the companies on the planet. Why mess with Pandora or Tesla?

  • Report this Comment On June 30, 2011, at 1:56 PM, baldheadeddork wrote:

    @waterinfo: "Pandora is doomed to failure because it has no control of its delivery mechanism, and in fact the delivery of its product will eventually cost much more than the product itself."

    On the first part, cable TV networks have no control over their delivery mechanism. How has that worked out?

    About the delivery cost: You can listen to 70 hours of streaming music a month before you bust the 2GB per month cap on the AT&T data pro plan. That's just on 3G, any listening on a wifi network doesn't count towards the limit. And AT&T is the only carrier with data caps at this time. Verizon is instituting them next month, but current users will be grandfathered in on the unlimited plans. Sprint, T-Mobile, Boost and others all offer unlimited data.

    Your claim runs in sharp contrast to the 20+ year of internet service pricing. The trend has always been towards a decrease or elimination of data limits. It's going to be this way with wireless broadband, too. There will be a brief period of usage caps as the service matures, but wireless broadband will soon become a commodity and the caps will disappear.

  • Report this Comment On June 30, 2011, at 2:05 PM, Clint35 wrote:

    Sean, I agree with you in both cases. But I've also learned to never say never. I was also a doubter of Sirius for a long time.

  • Report this Comment On June 30, 2011, at 2:13 PM, todinNYC123 wrote:

    Worth further thought

  • Report this Comment On June 30, 2011, at 2:18 PM, TiltnSpill wrote:

    I absolutely love Pandora, but I have to agree with the author (and the WSJ) on this one.

    Pandora doesn't have ANY operating leverage. I

    "As each user listens to it more and more, Pandora gets charged more and more," said Morningstar's Summer. You don't get any operating leverage in that model."

    Without a complete change in business model, I don't see how Pandora can make it.

  • Report this Comment On June 30, 2011, at 3:33 PM, TMFUltraLong wrote:

    Waterinfo & baldheadeddork,

    I think you both have valid points which add to my thesis that there exists no barriers to entry in Pandora's business model. Cable companies at least controlled the infrastructure build out - Pandora has nothing outside of their intellectual rights. At more than $3 billion now it just doesn't make sense. May have to make this my next CAPS red thumb.

    TMFUltraLong

  • Report this Comment On June 30, 2011, at 4:22 PM, Gato337 wrote:

    @ TMFUltraLong

    "One thing I didn't even go into is the infrastructure needed to run an electric car."

    Yes, its true that the infrastructure isn't developed yet (especially outside of California), but it will see rapid expansion over the next 2-3 years. Its kind of the chicken & the egg dilemma - no charging stations are installed because there aren't enough electric cars on the road to create demand, and people are reluctant to buy electric cars because of the lack of infrastructure.

    However, in terms of laying the groundwork for an infrastructure to supply electric cars, I know G.E. is leading the charge (pun intended) in marketing charging stations and developing solutions for problems like decreasing the time needed to fully charge the battery, etc. I've already seen one at my local Whole Foods grocery store.

    http://www.ge-energy.com/products_and_services/products/elec...

    While I agree with you that Tesla is unlikely to become profitable, the argument concerning lack of infrastructure will be moot within 5 years, and definitely by the end of this decade.

  • Report this Comment On June 30, 2011, at 5:56 PM, TMFUltraLong wrote:

    Gato337,

    I'd be blind to ignore those blaring GE charging station commercials I often see on TV, but think about the move toward biofuels or natural gas vehicles.

    Have you really seen any changes on that front. We've had natural gas available for quite some time. I live in a large city (Seattle) and for the life of me I've only ever seen one biofuel station and one natural gas pump. That doesn't mean they don't exist, but the infrastructure just isn't there and there's really no incentive to build it out.

    Considering that 12.5 million to 13 million cars may get sold in 2013, do we really care if Tesla is able to put perhaps 20k vehicles on the road? I mean there are green groups out there that'd say yes but from a financial perspective it makes zero sense. It's for that reason that, while a moot point, I'd have to say that infrastructure does play a very large part of why Tesla will never turn a profit.

    TMFUltraLong

  • Report this Comment On June 30, 2011, at 7:33 PM, hbofbyu wrote:

    I'm not convinced on the success of Pandora but if Pandora dies, it will be by the same forces that may also kill Sirius; specifically, free content widely available from a thousand other places on the web.

    You mention that there are no barriers to Pandoras business model. Facebook's business model has no barrier to entry either (Google has tried for years to compete with Facebook and can't do it). I don't think that is an appropriate argument for or against Pandora's potential success. Comparing Sirius to Pandora is not easy since they come from different technological directions. The big difference I see is that Satelite radio is pushed content. On a one hour drive to work I spend 30 minutes of it switching between a thousand stations to try and find something I like. What if I could specifically input exactly what I want? That to me is what is attractive about Pandora at a user level (but I can also find much of that on the web - using the same cell phone). As for Sirius, what if I didn't have to pay multi-million dollar contracts to Howard Stern, Oprah Winfree, Chelsea Handler, Dr. Laura and whoever else to attract subscribers? Satellite radio is not all gravy.

    Sean, You need to back up your argument as to why royalties hurt Pandora but they don't hurt Sirius. Does Sirius pay no royalties? If not, why?

    Cellular infrastructure will be more ubiquitous than electricity (cell towers are going away with higher bandwidths and mesh networks) with bandwidths thousands of times greater than what it takes to stream 1 hour of audio. Everyone already pays for smart phones. Adding the Pandora app takes 30 seconds and if I already have a data plan in place, is cheaper than satellite.

    Pandora may not make it. Sirius for certain will not make it based on their technology or barriers to entry. If they make it, it will only be because of the genius or lack therof in their programming. Making a bet on Sirius is like making a bet on NBC or CNN.

  • Report this Comment On July 01, 2011, at 1:03 PM, WilldaFool wrote:

    The case for Tesla (TSLA):

    1. TSLA is ready to launch a car that costs no more than a Camry, but with massive range.

    2. TSLA has fundamental patents on packaging of modular battery packs.

    3. New money raised for ramp-up on delivery of new models next year, with no shareholder dilution. Toyota and VW loaded up, plus undisclosed big names.

    4. IPO waiting period is long over, with insiders still accumulating. Shorts have been washed out with losses and overhang of near term 30 Call long positions.

    5. TSLA is hiring like mad, and their NUMMI plant is almost ready, with no union gorillas.

    6. TSLA is late on their battery shipments to VW because they got so many orders. The tsunami gave them a breather with Toyota shutdowns, but those plants are online now, and the RAVs (TSLA batteries) are flying out of the showroom.

    7. EV tax credits have support even from Republicans. And California has switched from subsidizing hybrids to only subsidizing EVs.

    8. Oil prices heading up, despite the silly reserve dump.

    9. Mostly, bet on Elon Musk: sent a vehicle into lower earth orbit for less than it cost for 1 day of the Afghan war.

  • Report this Comment On July 03, 2011, at 2:37 AM, undercurrents wrote:

    Public Radio is giving Pandora a run for its money.

  • Report this Comment On July 03, 2011, at 3:35 AM, maguro01 wrote:

    Tesla is not competitive with any of the models mentioned in the article. The writer apparently thinks that all EV's are somehow a single slot in the market maybe along with electric scooters.

    The Tesla 4-dr sedan is in a higher priced market than the others with performance/handling/creature comforts to match. It's more like a BMW 5xx series, but should be phenomenally quiet..

    The more of the other electrics that are sold the better off Tesla is as more chargers will be installed.

    I have no idea of what the market acceptance will be, but the idea seems to be to make a better car, rather than an electric as such. Since frequent maintenance is almost gone as well as only electricity the TCO should be reasonable. With the 300 mile packs one just has to see what people think of that range and the recharge time. It sounds practical.

    Making a really inexpensive electric car with very long range seems difficult presently because of the cost of the battery packs even if they use Tesla technology. The cost should drop with volume. I don't think the all-electric Toyota RAV-4 is available yet though I'm not sure. Tesla supposedly has contracts to supply battery packs to Toyota, Daimler, and Freightliner. The all-electric RAV-4 supposely has or is to have Tesla driveline parts. Toyota and Daimler have investments in Tesla. The Toyota investment largely offsets the expense of Tesla buying much of the NUMMI auto plant in Fremont.

  • Report this Comment On July 03, 2011, at 6:37 AM, ClayManBob wrote:

    Tried Pandora, wasn't impressed at all. I doubt it will hold up as it has little to offer, really.

    I hope that Tesla succeeds, but any all electric car is going to have to go at least 600 miles (pretty much as far as I'm willing to drive in a day anymore) before I'll even look at it. The Leaf and other all EV vehicles are really jokes unless you just drive around town very, very short distances. That's not the kind of driving my wife and I do.

    I've never thought that hybrids were a good answer, and still don't. You've got much more to go wrong with a vehicle with two power supplies, and they're asking for trouble. We still don't know what's going to happen when the battery packs wear out.

    Finally, the cost of the Tesla is going to have to come way down to make it affordable to the average person. Hopefully Toyota's involvement will help with that.

  • Report this Comment On July 03, 2011, at 10:00 AM, JF125780 wrote:

    Sean, I agree with you on all points. We both may be wrong, but there's too many great companies out there to waste my time with border line companies and of course I wouldn't touch siris x-m radio with a ten foot pole.

    Danny Kowkabany

  • Report this Comment On July 04, 2011, at 1:04 AM, baldheadeddork wrote:

    @WilldaFool: "1. TSLA is ready to launch a car that costs no more than a Camry, but with massive range."

    Show me a $57,000 Camry. Wait, if you want to talk about "massive" range, you better make that a $77,000 Camry. That is the base price for the Model S with the optional 300 mile battery pack.

    Thanks for being respectful of the reader's time and showing the depth of your knowledge early in the post.

  • Report this Comment On July 04, 2011, at 1:47 AM, baldheadeddork wrote:

    @Sean - "I think you both have valid points which add to my thesis that there exists no barriers to entry in Pandora's business model."

    I'd say low barriers instead of no barriers, but in the end I don't think it matters very much.

    What is more important to success in tech: exclusive technology or capturing a defining early lead? Most of the time, I think it's the latter. I'm not saying this just to be contrarian. We are in an age where declaring that you have new technology x is going to guarantee years of lawsuits from patent trolls and hoping your breakthrough fits in with someone else's product schedule. It might be better to just dominate first in something anyone can do. Or, even better, perfect the model after someone else has taken all the arrows.

    I'm not buying Pandora by a long shot. There are a thousand reasons they can fail in the next few years. But there is a revolution in mobile content coming very soon, and they are as well positioned as anyone to become a very big player in it.

    Tesla becoming profitable is a much longer bet. You make a very good point that 20,000 vehicles a year (worldwide) isn't going to move the needle on infrastructure. But there are so many other problems with Tesla's business plan that charging the cars is going to be a moot point.

    It's impossible to survive as an independent car manufacturer building 20,000 steel-constructed, gasoline-powered cars for $57K. That isn't a hypothesis. Jaguar sells 2.5 times as many cars in a bad year, their average selling price is way north of $60K, and it's been decades since they were viable as an independent company.

    Tesla has set out with a car that is much more expensive to build than any Jaguar. Electric powertrains cost substantially more than gasoline systems (the battery pack alone makes up nearly half the base price of the Model S) and Tesla is building its cars in 100% aluminum. Aluminum costs several times as much as steel for the volume of material needed to build a car and it's much more expensive to manufacture aluminum into a capable unibody.

    It's not enough just to be profitable in the car business. You have to be hugely profitable if you're going to survive. It costs hundreds of millions of dollars to create a new car. A multi-vehicle platform can easily cost over a billion dollars to get to Job One. The economics of the business are brutal on small volume manufacturers and Tesla is setting themselves up for an epic failure.

  • Report this Comment On July 05, 2011, at 2:40 PM, ERCOOP wrote:

    Article spot on. I'd like to short Pandora, but I don't know when the best time would be. A month or two from now when the IPO excitement has blown over?

  • Report this Comment On July 05, 2011, at 4:39 PM, RajeevRawat wrote:

    Your analysis is myopic and it lacks business maturity.

    Pandora's subscriber loyalty will enable it to not just renegotiate royalties, but also add incremental revenue streams. Watch it go GLOBAL!

    Tesla's design beats Ford, GM, Honda...and will continue to do so in the future. It is a status symbol and a hip car - exclusivity will keep it in high demand among the well heeled. Look deeper at its patents, which will also earn licensing income.

    Your assessment is patently short sighted and lacks depth of analysis.

  • Report this Comment On July 05, 2011, at 7:04 PM, mikepriz wrote:

    I don't understand why someone would want an electric car. If you are an environmentalist, do you know where electricity comes from? It comes from the coal fired power plants that you are so anxious to shut down. If everyone drove an electric car, how would the country supply the electricity? We already have brown outs in many parts of the country. Tesla may be profitable in the near future, but my advise is, if you do make some money, get out while the going is good.

  • Report this Comment On September 04, 2013, at 8:55 PM, orrjacob wrote:

    Don't you feel silly...

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