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NBC Weighs Down Profit at GE

General Electric posts a 6.1% gain in earnings despite a downturn at its entertainment unit. Its costly new TV shows have performed weakly.

October 14, 2006|Lorenza Munoz | Times Staff Writer

NBC Universal's operating profit fell 10% in the third quarter as higher revenue from a flurry of film and DVD releases was offset by a sluggish lineup of expensive new television shows.

The performance was a drag on the otherwise strong results of parent and U.S. market bellwether General Electric Co., which reported a 6.1% profit increase on a 12% gain in sales.

The results matched Wall Street expectations, but GE shares fell 24 cents to $35.98 on Friday.

"NBC had another tough quarter," GE Chief Financial Officer Keith Sherin said in a conference call with analysts.

NBC Universal, which makes up about 10% of GE's business, saw its revenue climb 20% to $3.6 billion. But operating profit fell to $542 million from $603 million a year earlier.

GE Chairman Jeffrey Immelt said that despite the profit downturn, NBC was rebounding and "well-positioned in the fourth quarter of 2006 and into 2007."

He cited an increase in prime-time ratings and an expectation that the network would finish the year on a financial upswing.

Several of the networks' biggest bets this season, including "Kidnapped" and Aaron Sorkin's drama "Studio 60 on the Sunset Strip," which stars Matthew Perry and Bradley Whitford, have opened to disappointing ratings. Their pilots each cost close to $7 million.

All the major networks are struggling with rising production and promotion costs amid decreasing revenue from the sale of commercials as advertisers migrate to the Internet.

In the news division, "NBC Nightly News" remained the top-ranked national evening newscast among the major networks. And despite the departure of former co-anchor Katie Couric, "Today" is still ahead of all morning show competitors and continues to be the division's top moneymaker.

Cable revenue grew 17% and operating profit increased 23%, led by USA Network and Bravo.

At GE's movie studio, Universal Pictures, film revenue was up 48% to a little more than $350 million. Universal released eight movies during the quarter, among them the popular "You, Me and Dupree" and the dud "Miami Vice," compared with six titles a year earlier. DVD revenue also rose, thanks to the release of five titles including "The Fast and the Furious: Tokyo Drift," compared with one title a year earlier.

GE's decision to buy a movie division in 2004 has helped the company buffer its losses from the television network, said Matt Collins, an analyst with Edward Jones.

"Its film business did better than it expected," Collins said. "Diversification from ... the film studio and its DVD business and the theme parks has paid off over the last year as NBC has fallen in the ratings competition. NBC came in at the low end of previous expectations."

Overall, Fairfield, Conn.-based GE, whose products include lightbulbs, power generation turbines and TV programs, said it earned $5 billion, or 48 cents a share, in the three months ended Sept. 30. That compares with a profit of $4.7 billion, or 44 cents, a year earlier.

Profit rose 24% in GE's infrastructure businesses, which include aviation, rail and water-treatment products, and 10% in its industrial business, which includes appliances.

The results included a loss from discontinued operations of $100 million and adjustments related to the divestiture of two units, Genworth and GE Insurance Solutions, and the results of GE Life, which is being sold.

Earnings from continuing operations were 49 cents a share, which matched the consensus estimate of analysts surveyed by Thomson Financial.

Revenue climbed to $40.9 billion, from $36.4 billion a year earlier. Analysts had forecast sales of $39.8 billion.

lorenza.munoz@latimes.com

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The Associated Press was used in compiling this report.

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