Apple Inc. (AAPL), Pandora Media Inc (P): Lack of Innovation Could Sink Technology’s Titanic

The smartphone giant has officially launched its iTunes Radio streaming service which is ‘inspired’ by companies like Pandora and Spotify. The radio service will have almost 200 channels and will be available for free. The users will be motivated to purchase songs they like on iTunes Radio from the iTunes store. Just like Pandora Media Inc (NYSE:P), this will also be an advertisement supported service. The company has still not announced an advertisement-free subscription which is common to Spotify and Pandora.

Shares of Pandora continue to defy all logic. The stock has already appreciated 80% in the last six months and has shown unprecedented resistance to the iTunes Radio launch. Pandora Media Inc (NYSE:P) currently has almost 200 million users and 40% to 50% come from the iOS platform. As the iTunes Radio is limited to iOS devices, almost half of Pandora users are shielded from its effect. This is still enough to cause irreparable harm to a company trying to build economies of scale to reduce content acquisition costs.

Bottom Line

Once again Apple Inc. (NASDAQ:AAPL) is playing catch up to companies like Google Inc (NASDAQ:GOOG) and Pandora Media Inc (NYSE:P). This is another testament to Google’s newfound innovation leadership in the U.S. technology sector and is the best long term bet in the online advertisement business. The company continues to build new and exciting products such as Google Glass while Apple is stuck upgrading its iPhone and iPad devices with memory, processors and better icons.

Apple continues to disappoint Wall Street, and the Street’s displeasure is showing in the lack of excitement over WWDC launches; valuations have slipped instead of rallying. Long term Investors are better off avoiding Apple Inc. (NASDAQ:AAPL) until the company increases its R&D budget and focuses on rolling out a new class of products. Apple’s valuations will rally once we get into launch season, proving an opportunity for short term profit taking. As expected, the iTunes Radio reinforces the ‘Short’ thesis on Pandora.

The article Lack of Innovation Could Sink Technology’s Titanic originally appeared on Fool.com and is written by Mohsin Saeed.

Mohsin Saeed has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Mohsin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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