Amid a fierce competitive environment due to the rise of subscription music platforms, Pandora Media Inc. ( P ) announced on June 27 co-founder and CEO Tim Westergren is stepping down.
After the announcement, Pandora stock, which is down 35% year to date, swelled 0.4% to close at $8.49 on Tuesday.
Previously serving as CEO and president from May 2002 to July 2004, Westergren said he returned to the company last year to "drive transformation across the business" after former CEO Brain McAndrews stepped down.
Chief Financial Officer Naveen Chopra is acting as interim CEO while the board searches for a replacement. Two other members of the management team, President Mike Herring and Chief Marketing Officer Nick Bartle, are also leaving the company.
The board also announced it appointed Jason Hirschhorn, founder and CEO of ReDEF Group, to fill a recently vacated seat on the board.
With stiff competition from streaming services like Spotify AB and Apple Inc. 's ( AAPL ) Apple Music, Pandora has had to change its strategy in order to stay afloat.
Roger Faxon, a member of the board, commented on the changes the company is making to refocus and reinforce its business .
"As listeners continue to move from traditional terrestrial radio to more dynamic and flexible offerings, it is the board's belief that this transition continues to present a massive opportunity and that Pandora is in an ideal position to capture an increasing share of this audience," Faxon said.
Among its business initiatives, the company launched its Premium subscription service for $10 a month earlier this year, which saw some success and an increase in subscribers. In addition, it entered an agreement with Sirius XM Holdings Inc. ( SIRI ) on June 9 for a $480 million strategic investment. When the deal closes, the internet radio service will name three directors to Pandora's board. One will serve as chairman.
The same day Pandora announced it is selling its ticketing service, Ticketfly, to Eventbrite Inc. for $200 million. The price is a significant discount to the $450 million the company originally paid when it acquired the service in 2015.
Westergren said he is comfortable with where the company is currently.
"We accomplished far more than we anticipated. We rebuilt Pandora's relationships with the music industry, launched a fantastic Premium on-demand service and brought a host of tech innovations to our advertising business," Westergen said. "With these in place, plus a strengthened balance sheet, I believe Pandora is perfectly poised for its next chapter."
Evan Tarver, an analyst with fitsmallbusiness.com, believes the sudden management change is indicative of trouble ahead for the company. He highlights that while the announcement made it seem like the move was Westergren's idea, the frequent management changes and loss of market share do not bode well for Pandora.
"What it shows is the company doesn't have any direction," Tarver said in a note. "If they had planned Westergren's exit, they would have already been able to name a CEO as his successor. Instead, they have put in place an interim CEO as they continue their search for a successor."
Pandora has a market cap of $2.16 billion; its shares were trading around $8.98 on June 28 with a price-book (P/B) ratio of 4.6 and a price-sales (P/S) ratio of 1.5.
Gurus Leon Cooperman ( Trades , Portfolio ), Julian Robertson (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Mario Cibelli (Trades, Portfolio), RS Investment Management (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio) all own the stock.
Disclosure: I do not own any stocks mentioned in the article.
This article first appeared on GuruFocus .