OAKLAND (CBS / AP) — Internet radio company Pandora Media Inc. said Tuesday that its third-quarter net profit more than tripled to $2 million as revenue rose slightly faster than costs. But it predicted a loss in the fourth quarter, a bad surprise for investors who sent shares tumbling.

CEO Joe Kennedy said in an interview that worries about the federal tax increases and government spending cuts set to take effect Jan. 1 unless Congress acts -the so-called “fiscal cliff”- are affecting the advertising revenue outlook. That is especially true for January, when any tax increases could take effect. Pandora’s fourth quarter ends at the end of January.

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“We are seeing advertisers becoming more cautious over the last couple of months with both macroeconomic concerns and `fiscal cliff’ issues,” he said. Kennedy noted that most of the predicted slowdown is expected in January, not the first two months of the current quarter.

Net income in the three months to Oct. 31 amounted to a penny per share. Excluding the cost of compensating executives with stock, adjusted earnings came to 5 cents per share, beating the penny per share expected by analysts polled by FactSet.

Revenue rose 60 percent to $120 million, higher than the $117 million expected by analysts.

Pandora predicted a loss in the fourth quarter of between 6 cents and 9 cents per share. That’s far worse than the penny per share profit analysts were looking for.

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Kennedy said investments in the company’s platform and the hiring of more local radio ad sales people also factor into its fourth-quarter outlook. He noted, however, that “those are investments that have a clear pay-off next year and beyond.”

The company’s stock plunged $1.69, or 18 percent, to $7.76 in after-hours trading after the quarterly results were released.

Despite the weak outlook, Pandora continues to gain in popularity. The company said listener hours in November rose 58 percent from a year ago to 1.27 billion, while the number of active listeners grew 45 percent to 62.4 million. Its share of radio listening hours in the U.S. rose to 7.09 percent from 4.32 percent a year ago.

The company has been pressing federal lawmakers to pass a bill that would reduce the royalties it pays to performers and recording companies.

Kennedy said Tuesday that royalties were “extraordinarily, unfairly high by any measure.” He said Pandora pays more royalties than any other radio company in the U.S. and more than the total paid by all the radio companies in any one country outside the U.S.

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