Spotify, Apple, and Google Music Challenge Pandora and Sirius XM

As companies like Pandora (NYSE:P) prove their business model, old-line competitors like satellite entertainment company Sirius, Inc. (NASDAQ:SIRI) need to figure out how to compete — especially with Google (NASDAQ:GOOG) Music offering “over half a million albums for $4.99 and over ten million tracks for 49¢” over the holiday season.

Pandora and newer companies like Spotify offer dead-simple technology, clear pricing, and only the need for a working internet connection to sell their services.  Both companies are trading near their 52-week lows, but likely face different futures.  Pandora’s stock has traded in a 52-week range $9.15 to $26 and recently traded at $10.01.  Sirius’ shares have traded in a 52-week range of $1.27 to $2.44 and recently traded at $1.80.

Following is a quick look at some institutional investors buying in Pandora (NYSE:P) stock:

Morgan Stanley acquired 1,726,178 shares in the third quarter of 2011, which were worth $25,288,508 at 9/30/11.  Allen Operations LLC acquired 310,560 shares in the third quarter of 2011, which were worth $4,549,704 shares at 9/30/11.  Susquehanna International Group acquired 70,832 shares in the third quarter of 2011, which were worth $1,037,689.  HBK Investments acquired 65,100 shares in the third quarter of 2011, which were worth $953,715.

Despite the bullishness evidenced by Morgan Stanley and the others above, a number of companies sold off their entire stakes in Pandora in the third quarter. Eagle Asset Managemt held 1,655,885 shares, worth $31,312,785 at the end of the second quarter.  By the end of the third quarter, they held no shares.

These investors must agree with Forbes columnist Frederick Allen who prefers Spotify and MOG to Pandora.

Other institutional investors that sold off their entire holdings include: RS Investment Management Co. held 373,920 shares, worth $7,070,827 on 6/30/11. Kingdon Capital Management  held 348,622 shares, worth $6,592,442, on 6/30/11.

No matter who ultimately wins the prize of music consumers, the holidays have proven the battle will be fierce and there will be no shortage of competitors.

Pandora Competitors to Watch: Sirius XM Radio Inc. (NASDAQ:SIRI), Google Inc. (NASDAQ:GOOG), Apple Inc. (NASDAQ:AAPL), CBS Corporation (NYSE:CBS), Spotify, and Amazon.com, Inc. (NASDAQ:AMZN).