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Apple News Roundup: Will Apple Be the Death of Pandora?


Apple diversifies its supply chain away from Samsung.

MINYANVILLE ORIGINAL Already struggling with high royalty costs from the music industry, Pandora (P) may face a new threat from Apple (AAPL). According to the Wall Street Journal, Apple has begun talking with music labels to license music for a custom radio service.

iTunes already currently earns more than any other music retailer. Apple will try to generate more revenue through a new music service via iAd. These advertisements ideally will be displaced on all Apple devices because the music service would operate on iPads, iPhones, Mac computers, and potentially Microsoft computers. Pandora has 59.4 million active users, and forecasts have Pandora earning $226.4 million in mobile ad revenue for 2012. Apple hopes to generate money from its 400 million iTunes accounts.

Pandora pays royalties based on the rates set by the government, but Apple wants to set its own rates with record labels. If successful, the Apple custom radio service could pose a major threat to Pandora, which already reported a loss of $5.4 million for its most recent quarter, which ended on July 31. Pandora pays 60% of its revenue to the rights holders of the music.

Pandora's stock price has dropped more than 16% in pre-market trading.

Apple Diversifies Away from Samsung.

Reuters reported yesterday that a source with direct knowledge said that Apple has dropped Samsung (SSNLF) from a list of memory chip supplies for the first iPhone 5 batch. Apple has selected Toshiba (TOSBF), Elpida Memory (ELPDF), and SK Hynix (000660.KS) to supply DRAM and NAND chips for the phone. Samsung will remain on Apple's initial supplier list for microchips. The South Korean company has been a major supplier of microprocessors, flat screens, and memory chips in the past for the iPhones, iPads, and iPods.

Apple has been recently trying to acquire its own chipmakers. Earlier in the year, Apple acquired Anobit, an Israeli-based startup that produces flash memory chips for the iPhone, iPad, and MacBook Air, for between $400 million and $500 million. Before the acquisition, a major Taiwan-based firm rejected a $1 billion bid from Apple for exclusivity in the production of semiconductors.

The source claims that Apple did not reduce its orders from Samsung because of their current patent disputes in ten countries.
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