Shares of Pandora Media (P) rallied in morning trading after the online radio service said it expects its fourth quarter revenue and adjusted EBITDA results to exceed its prior forecast due to strong advertising performance and new paid subscription customers. The company also announced plans to cut its U.S. workforce by about 7%.

FOURTH QUARTER UPDATE: Pandora said yesterday afternoon that it expects to surpass the previously announced guidance for revenue and adjusted EBITDA for the fourth quarter. In October, Pandora forecast Q4 revenue of $362M-$374M and an adjusted EBITDA loss of ($51M)-($39M). Prior to yesterday's update, analysts expected the company to report quarterly revenue of about $369M. The company is scheduled to announce results on February 9. Pandora Plus signed more than 375,000 new subscribers by the end of December, bringing total paid subscription customers to more than 4.3M, the company said.

WORKFORCE REDUCTION AND OVERHAUL: Pandora also announced yesterday plans to cut its U.S. employee base by about 7% excluding Ticketfly as part of measures to reduce overall operating costs in 2017. Pandora said it is also leveraging its analytics platform and ad insertion logic to drive additional revenue and realize leverage in content costs. CEO Tim Westergren stated, "While making workforce reductions is always a difficult decision, the commitment to cost discipline will allow us to invest more heavily in product development and monetization and build on the foundations of our strategic investments." As Pandora faces an increase in competing services, the company has over the last year introduced new subscription services, co-founder Westergren returned to the company as CEO, replacing Brian McAndrews, and hired advisers to assess strategic options, including a potential sale.

SIRIUS UPDATE: Despite comments this week from SiriusXM (SIRI) CFO David Frear that an offer for Pandora "is not likely," The New York Post reported this morning that SiriusXM Chairman Greg Maffei told investors that the company "would look at" a deal "at the right price." Maffei previously reached out to Pandora's board, but rumors had swirled that his company's interest had cooled.

ANALYST SEES 'SEVERAL POSITIVES' IN PANDORA REPORT: Canaccord Genuity internet analyst Michael Graham this morning noted "several positives" in Pandora's pre-announcement, including the number of upgrades by subscribers from the ad-supported product and management's statement it will not need additional capital. Graham reiterated his Buy rating and $18 price target on Pandora shares.

PRICE ACTION: Pandora is up over 6% in morning trading to $12.77. SiriusXM is up about 1% to $4.62.