- The Washington Times - Monday, February 26, 2001

All companies depend on advertising to sell their products, but some, such as newspaper and radio companies, depend on advertising as their primary moneymaker.

The stock performance of Lanham's Radio One Inc., analysts say, is a prime example of what happens to markets predominantly dependent on advertising dollars during a slow economy.

"Over a 12-month period, two things have happened the economy deteriorated significantly. Radio gets its revenues directly from ads, and the growth in revenues have slowed in these economic conditions," Frank Bodenchak of Morgan Stanley Dean Witter in New York says. The decline in ads from dot-coms also made a significant contribution, he adds.

"[Radio companies] are waiting for an economic rebound, but they are typically recession-resilient," says Andrew Marcus of Deutsche Bank in Greenwich, Conn. Mr. Marcus gives Radio One a "strong buy" rating.

Radio One, a broadcasting company made up of a nationwide chain of stations, reached a 52-week high of $32 on June 30, but less than four months later, the stock plummeted to $5.56. Shares of Radio One were at $14.44 Friday.

Net revenue for the company's fourth quarter ended Dec. 31 was up 135 percent to $58 million from $24.7 million for the like quarter the year before. Yearly net revenue was up 91 percent to $155.7 million from $81.7 million for the year before. The company reported net losses of $12.9 million (15 cents per diluted share) from net income of $1.8 million (3 cents) for the like quarter the year before. Annual net losses jumped 904 percent to $13.5 million (16 cents) from $1.3 million (3 cents) for the year before.

Diluted shares reflect the value of options, warrants and other securities convertible into common stock.

Though Radio One's stock slipped as of late, analysts say there really isn't much to worry about, saying that other radio companies aren't handling the slow economy as well as Radio One.

"During the first half of this year, it was posting between 5 and 10 percent in same-store growth. Others were expected to post flat growth," Mr. Bodenchak says. Radio One's competition includes Clear Channel Communications Inc., Infinity Broadcasting Corp./ Viacom, and Entercom Communications Corp.

Radio One has already purchased 15 of Cincinnati-based Blue Chip Broadcasting Inc.'s 19 stations, which gives them 63 radio stations nationwide.

Mr. Bodenchak says he wouldn't be surprised if Radio One went into other ventures, and also says he projects revenue growth to approach $5.5 billion over the next five years, from the $3.5 billion it's at now.

"I expect it'll continue to get larger through strategic market acquisitions, and since they quadrupled the size of the company over the past two years, they are more effective in targeting national ad dollars," he says. "Maybe it'll form a radio network, or it might do joint ventures with other African-American channels, like BET."

He also says that radio, once passed over by advertisers more interested in television and newspapers, is coming into its own as radio markets continue to get larger.

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