Clear Channel Shift Sparks Stock Sell-Off

Clear Channel Communications Inc. on Tuesday tried to ease concerns about its performance after the abrupt shift of its top radio division executive to a lower-profile post, but investors seemed unconvinced.

Although the company announced that its second-quarter earnings would beat projections, Clear Channel shares fell 16.5% to $25, down $4.94, on the New York Stock Exchange.

The sell-off followed the surprise announcement late Monday that Randy Michaels, the colorful and controversial chief of Clear Channel’s sprawling 1,200-station radio operation, would step down to head a new internal think tank focusing on broadband and satellite technology. Company President Mark Mays is stepping in as acting chief of the radio division.

Analysts said Michaels’ exit--coupled with a series of regulatory and legal issues swirling around the radio giant--underscored doubts about Clear Channel’s strategy, notwithstanding the revised earnings projection. To further allay investor concerns, Clear Channel said it was moving up the release of its second-quarter earnings from July 31 to today.

The San Antonio media conglomerate said it would better its earlier forecast of $600 million to $615 million in EBITDA, or earnings before interest, taxes, depreciation and amortization, the preferred financial measure for media companies.

Jessica Reif Cohen, a media analyst for Merrill Lynch & Co., said Michaels “is a very capable radio executive and [we] view his departure as a negative. What’s more, while Mark Mays has experience running the radio division, we find it odd that the company did not have a replacement for Mr. Michaels in place.”

Criticism about anti-competitive business practices and questionable deals with independent record promoters have been “a distraction that could take away from the primary job of managing this large complement of radio stations,” said James Goss, an analyst with Barrington Research. “I don’t think [Michaels’ exit] necessarily takes everything away. They have plenty of upside potential if they can improve the profitability of their properties. But they need to figure out a strategy that will best enable them to do that.”

Clear Channel hopes to generate additional profit by selling advertising across its “platform” of assets acquired in a series of multibillion-dollar deals. In addition to radio stations, these include about 135 concert venues and an estimated 700,000 billboards and outdoor ad spaces.

But advertising experts say the company hasn’t delivered.

“Their cross-platform stuff has not come to fruition,” said Matt Feinberg, a senior vice president overseeing radio for ad-placement giant Zenith Media.

Clear Channel officials said Michaels decided to leave the radio post Monday after a conversation with Mays. The company said Michaels’ replacement will be based in San Antonio, not the Covington, Ky., headquarters of the radio division.

Widely known within the industry for his aggressive management style and sometimes brusque remarks, Michaels often seemed out of place working for staid company founder Lowry Mays and his family.

One music executive who frequently interacts with the company recalled that Michaels appeared at a radio convention being carried in on a throne. At another industry event this year, Michaels showed up dressed as a disco-era deejay and chastised radio and record executives for clinging to 1970s-era business philosophies.

“I don’t see that as the image the Mays family wants to project,” the executive said. “You’ve got oil and water there.”