Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



A Number Pandora Can't Ignore

Nice, Pandora (NYSE: P  ) . A net addition of 700,000 new paying subscribers, with total paying subscribers up 114% year over year -- that's impressive! Or is it? When we bring Apple's (NASDAQ: AAPL  ) iTunes business into the picture, the story begins to look very different.

A lurking giant
What's the figure that's haunting Pandora? 575 million, which is the number of Apple's iTunes accounts linked to credit cards. With the recent announcement of iTunes Radio at this year's Worldwide Developers Conference, Pandora investors should take time to digest this number.

iTunes Radio. Source: Apple.

Pandora's 2.5 million paying customers are like breadcrumbs to Apple's 575 million. Plus, Apple gains new iTunes accounts in droves. In the last 12 months alone, Apple added about 175 million accounts -- quite a contrast from the paltry net increase of 700,000 paying subscribers for Pandora in its most recent quarter.

And in terms of revenue, Apple's iTunes, software, and services segment delivers some massive numbers:

Sources: Apple SEC filing, reclassified summary data. Amounts are based on the trailing 12 months. All dollar figures are in millions.

Pandora's $472 million revenue in the trailing 12 months looks like small beans when compared to Apple's iTunes, software, and services revenue. To add some context to the impressive size of this Apple segment, it commands more revenue than Facebook, Netflix, Sirius XM Radio, and Pandora combined.

Yes, this segment includes sales unrelated to music, like e-books, apps, and software, but all of these are sold in the Mac App store. And the Mac App store, of course, is part of the iTunes store. Apple guru Horace Dediu estimates that this business has a gross margin between 15% and 17%, with upside possible. By his calculations, the segment could have contributed as much as $2 billion in revenue in 2012, up from about $1.6 billion the year before.

Apple's too big to ignore
2.5 million versus 575 million. That difference is a chasm. Can Pandora survive the advent of Apple's new iTunes Radio?

There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2485929, ~/Articles/ArticleHandler.aspx, 9/27/2016 8:09:42 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 10 hours ago Sponsored by:
DOW 18,094.83 -166.62 -0.91%
S&P 500 2,146.10 -18.59 -0.86%
NASD 5,257.49 -48.26 -0.91%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/26/2016 4:00 PM
AAPL $112.88 Up +0.17 +0.15%
Apple CAPS Rating: ****
P $13.99 Down -0.10 -0.71%
Pandora Media CAPS Rating: **
FB $127.31 Down -0.65 -0.51%
Facebook CAPS Rating: ***
NFLX $94.56 Down -1.38 -1.44%
Netflix CAPS Rating: ***
SIRI $4.17 Down -0.04 -0.95%
Sirius XM Radio CAPS Rating: **