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GE profit declines as expected

The firm blames its financing unit for the 22% drop. It is on track to meet 2008 forecast.

October 11, 2008|From the Associated Press

HARTFORD, CONN. — General Electric Co. spared investors any nasty surprises Friday as it reported a 22% drop in third-quarter earnings, meeting its own lowered forecast.

It blamed the decline on its struggling finance arm. The company's loan and lease business has been hammered by the worst financial crisis since the 1929 stock market crash.

GE, which also owns NBC Universal and makes products as diverse as jet engines and water treatment systems, reported net income of $4.3 billion, or 43 cents a share. Sales rose 11% to $47.23 billion.

A year earlier, the company earned $5.56 billion, or 54 cents.

The Fairfield, Conn.-based company has cited softening profit at GE Capital, which provides financing to a wide range of clients. Since the spring, troubled credit markets and waning confidence in global financial systems have cut into profit there. GE has lowered its 2008 forecast twice since April.

Analyst Nicholas Heymann at Sterne Agee in New York said investors were nervous that GE might lower its forecast again.

"Investors are saying, 'We see two adjustments before we get into rough seas. How many are we going to see when we're in rough seas?' "

GE shares rose $2.49, or 13%, to $21.50 on Friday as the broader market swung wildly. GE is down 42% since April 10, the day before it shocked investors by widely missing its target for the first quarter.

The latest results, the third straight quarter of diminishing profit, were dragged down by a 33% decline in profit at GE Capital and an 82% drop at GE's consumer and industrial unit.

GE remains on track to meet its 2008 earnings forecast, which it lowered by about 10% last month to $19.5 billion to $21 billion. GE Capital is expected to earn more than $9 billion for the year, it said.

Some analysts have said GE should sell NBC because it does not fit the company's industrial and commercial business mix. But GE Chief Executive Jeffrey Immelt has defended the media franchise.

"Cable and films had a solid quarter and the success of the Beijing Olympics showed the value of the network model," he said.

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