Why did Clear Channel remove Randy Michaels as head of its radio division last week? The company didn't supply a clear answer, and Wall Street didn't like it. Market reaction was a severe pounding to an already battered stock.
The decision on Michaels was revealed Monday, July 22, after the markets closed. On Tuesday, the stock closed at $25, down 16.5% and about 60% off its 52-week high of $61.99.
The company tried to address the PR nightmare by issuing its second-quarter earnings last Wednesday, a week earlier than originally planned. The same day, in a teleconference call, it reviewed second-quarter results and addressed what CEO Lowry Mays described as "very negative rumors with no basis whatsoever" circulating about the company.
He stressed first of all that there has been no hanky-panky in the company's financial presentations.
Message No. 2: Don't mistake us for the Rigases. Mays went out of his way to distance Clear Channel from "family companies"—he specifically cited Adelphia—in which management has been accused of looking out for family interests first and the rest of the stockholders second.
Clear Channel President Mark Mays (Lowry's son) addressed but didn't really explain Michaels' shift into a post where he'll evaluate new technologies. Mays credited Michaels with doing a "fantastic job." He also stressed the "stability" of senior and midlevel management and insisted that the division's management strength will continue to be the general managers who run the Clear Channel stations.
Speculation outside the company was that the flamboyant Michaels didn't fit with the Mayses' more buttoned-down style.
Meanwhile, pro forma revenue dipped 3.5% in the second quarter, to $2.16 billion. Entertainment division revenue fell 14%, to $612 million. But pro forma radio revenue (the company's largest segment) was up 4.5%, to $991 million. Pretax earnings were up less than 1%, to $625 million.
Even so, the stock price regained Thursday only 70 cents of the $5 it lost Tuesday.