GE profit falls 22 percent

FAIRFIELD, Conn. (AP) - General Electric Co.'s third-quarter profit fell 22 percent, hurt by lower earnings at its finance business, which has been battered by the worst financial crisis since the stock market crash of 1929.

GE, a bellwether of the U.S. economy, makes everything from jet engines to water treatment systems and owns NBC Universal. Friday's results matched the bottom end of the company's lowered earnings forecast and spared investors any nasty new surprises after months of disappointing news.

For the third quarter, GE reported total net income of $4.3 billion, or 43 cents per share, down from $5.56 billion, or 54 cents, a year earlier. Last month, it lowered its forecast to between 43 cents and 48 cents per share from its prior range of 50 cents to 54 cents.

Quarterly results were dragged down by a 33 percent profit decline at GE Capital, its struggling finance arm which handles leases and loans, and an 82 percent drop in profit at GE's consumer and industrial unit, which makes appliances and other products. GE plans to spin off or sell its appliances unit.

Looking ahead, GE said it remained on track to meet its 2008 earnings forecast, which it lowered by about 10 percent last month to between $19.5 billion and $21 billion. Its GE Capital is on track to earn over $9 billion for the year, it said.

GE's huge industrial business remained solid. The Fairfield, Conn.-based company expects growth to continue, helped by strong orders in its infrastructure business, which makes water treatment plants, energy projects and other large-scale items. GE's total orders backlog stands at $170 billion, up 20 percent from last year.

Still, Citigroup analyst Jeffrey Sprague told investors in a note Friday that while GE has "some outstanding assets and a solid AAA balance sheet," its operating performance is uneven and its finance portfolio is risky.

"We believe GE may have reached the point that its size and complexity have become a hindrance to effective management," he said.

However, Sprague maintained his "Hold" rating, citing the company's exposure to global infrastructure markets, good cash flow and high dividend yield.

GE has blamed softening profits on GE Capital, battered since the spring by troubled credit markets and waning confidence in global financial systems. The company has cut its 2008 earnings forecast twice since April, announced a reorganization, and sought cash infusions by selling $15 billion worth of stock.

Shares of GE fell about 1.6 percent in premarket trade Friday, amid signals of a sharply lower stock market open. On Thursday, they closed at $19.01, its lowest level since it closed at $18.85 on May 2, 1997.

GE Capital is the conglomerate's financial business that provides consumer finance in car loans, mortgages outside the United States, credit cards and other products. Its commercial side finances real estate, corporate lending and leasing. GE also finances energy projects and airline leasing.

The unit's profit totaled $2 billion, consistent with last month's revised forecast, but down from $3 billion in the third quarter last year.

"While GE Capital is not immune from the current environment, we continued to outperform our financial services peers," General Electric Chief Executive Jeff Immelt said in a statement Friday.

Immelt also highlighted GE's strengths in its energy business, which earned $1.4 billion in the quarter, up 31 percent, and NBC Universal, which benefited from its Olympics coverage in Beijing in August. The unit's profit totaled $645 million, up 10 percent from a year earlier.

Some analysts have said GE should sell NBC because it does not fit the company's industrial and commercial business mix. However, Immelt has defended the media franchise, and its performance - particularly in comparison with GE's faltering financial business - gave him ammunition this quarter.

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

GE's revenue totaled $47.23 billion, up 11 percent.

Analysts polled by Thomson Reuters forecast earnings of 45 cents a share on revenue of $47.34 billion.

Immelt said GE has taken steps to reduce its leverage and improve liquidity to protect its AAA rating. Earlier this month, GE raised $12 billion in a common stock offering and $3 billion from preferred shares sold to Warren Buffett's Berkshire Hathaway Inc. However, those shares carry a costly 10 percent dividend.

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