Apple ITunes Radio Seen as Little Threat to Pandora Service

June 10 (Bloomberg) -- Piper Jaffray Senior Research Analyst Gene Munster discusses Apple's WWDC announcements with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

Apple Inc. (AAPL)’s foray into the online-radio business may not turn out to be a Pandora Media Inc. (P) (P) killer after all.

Apple introduced iTunes Radio yesterday as part of a broad overhaul of its mobile operating system for the iPhone and iPad. The service shares many features with other Web-radio products, such as letting users create stations based on preferences.

Pandora’s shares climbed after Apple announced the feature with little fanfare at its annual developers conference in San Francisco, indicating that the company won’t immediately spend heavily to promote the service against competitors. Pandora’s stock had been dragged down by as much as 28 percent from a two-year high in the past month amid speculation that Internet radio from Apple would be robust enough to lure away users.

“In terms of features they talked about, it was a little underwhelming,” said Douglas Anmuth, an analyst at JPMorgan Securities LLC in New York. “They didn’t give a whole lot of details.”

The music service, which will be supported by advertising and aimed at driving new song purchases through iTunes, was part of a sweeping redesign of Apple’s iOS mobile operating system that Chief Executive Officer Tim Cook unveiled at the conference. ITunes Radio will be available later this year when iOS 7 is rolled out to users.

Photographer: Andrew Harrer/Bloomberg

Pandora Media Inc. has more than 200 million registered users. Close

Pandora Media Inc. has more than 200 million registered users.

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Photographer: Andrew Harrer/Bloomberg

Pandora Media Inc. has more than 200 million registered users.

Shares of Apple declined less than 1 percent to $437.60 at the close in New York, leaving them down 38 percent from a record in September. Pandora fell less than 1 percent to $15.35. The stock is up 67 percent this year.

Software, Services

“ITunes has expanded and extended its radio feature to match what other services have offered for years,” Joe Kennedy, CEO of Oakland, California-based Pandora, said in an interview. Pandora has more than 200 million registered users, he said.

By adding new services and delivering software upgrades, Apple, based in Cupertino, California, is seeking to blunt the advance of Google Inc. (GOOG)’s Android mobile operating system, which now runs on 74 percent of smartphones, compared with Apple’s 18 percent in the first quarter, according to research-firm Gartner Inc. IPhone sales climbed about 16 percent in the first quarter, lagging the smartphone market, which grew 43 percent.

Pandora’s app is available on Android, iOS and on any computer with a Web browser, as well many television set-top boxes, while iTunes Radio isn’t available on Android.

Apple (AAPL)’s revamped software carries a new overall look, including a simplified user interface, new color scheme and the removal of design elements such as the wooden bookshelves for the Newsstand application. Applications for the camera, pictures, e-mail, calendar and weather were all redone.

Photographer: David Paul Morris/Bloomberg

Eddie Cue, senior vice president of internet software and services at Apple Inc., speaks during the keynote of the World Wide Developers Conference (WWDC) in San Francisco on June 10, 2013. Close

Eddie Cue, senior vice president of internet software and services at Apple Inc.,... Read More

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Photographer: David Paul Morris/Bloomberg

Eddie Cue, senior vice president of internet software and services at Apple Inc., speaks during the keynote of the World Wide Developers Conference (WWDC) in San Francisco on June 10, 2013.

Digital Lives

IOS 7 also lets users switch between programs more easily and gives quicker access to frequently used features, such as Wi-Fi settings. A new security tool lets owners disable a stolen iPhone so it can’t be reused. The Siri voice application was also updated and will rely on Microsoft’s Bing search engine, rather than Google’s, for some tasks.

“When an individual puts iOS 7 on their iPhone or iPad, it will look like a brand new device,” said Tim Bajarin, an analyst at Creative Strategies Inc. in Campbell, California.

Apple also showed an upgrade to the Mac operating system, called OS X Mavericks, and enhancements to its iCloud web-storage system.

Upgrades to software and services are part of ongoing efforts by Apple, Google and other companies such as Microsoft Corp. (MSFT) (MSFT) to enable customers to manage their digital lives across different devices, be it a laptop, smartphone or tablet. The iOS 7 software lets users’ appointments, passwords, map directions and other information follow them between devices, Craig Federighi, Apple’s software chief, said at the conference.

Hardware Next

Automotive companies including Ford Motor Co. (F) (F) and Honda Motor Co. also will begin introducing cars that will link to iOS starting in 2014, Apple said.

The announcements set the stage for more product introductions later in the year, when analysts predict that Apple will unveil a new iPhone and iPad.

“There is no way Apple will exit the year without new iPhones and new iPads,” said Bajarin. He also expects the company to introduce a new MacBook Pro laptop.

Changes to the software behind the devices that generate more than 70 percent of Apple’s revenue have been in the works since Cook shuffled his lieutenants, putting head industrial designer Jonathan Ive in charge of the look and feel of Apple’s software. A longtime confidant of co-founder Steve Jobs and the draftsman behind the iPhone and Mac, Ive has been leading the revamp of iOS.

“IOS 7 is the biggest change to iOS since the introduction of iPhone,” Cook said at yesterday’s conference.

Product Innovation

While users won’t be able to get their hands on iOS 7 until later this year, not all designers were impressed by the new look. The changes appear to be rushed and unrefined, said Mark Rolston, the chief creative officer at Frog Design Inc., which designed some of Apple’s early products.

“If you weren’t on a big stage and he was just an average designer, I’d say that was a great first try,” Rolston said. “Unfortunately, the world is watching and, measuring it against Apple and Jonathan Ive, I’m disappointed.”

Apple’s upgrade to the Mac operating system was aimed more at delivering tighter integration with iPhones and iPads, rather than a new look and feel. Designed to run on less energy than prior versions, Mavericks conserves battery life and also includes features for using multiple screens, Federighi said.

Apple, whose stock slide has raised questions about its pace of innovation, also updated the MacBook Air, its lightweight laptop, with new processors and memory, enabling faster operation and longer batter life. The company also unveiled a new Mac Pro desktop computer, with advanced power and memory features for high-end users. The high-end computer will be assembled in the U.S., Cook said, part of Cook’s plan to shift some of Apple’s manufacturing to the U.S.

“Can’t innovate any more my a--,” Phil Schiller, Apple senior vice president of marketing, said at the event.

To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net; Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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