NBCU Parent Issues Profit Warning
General Electric's huge financial arm dented by Wall Street woes.
By Robert Marich -- Broadcasting & Cable, 9/25/2008 7:28:00 AM
Wall Street’s credit crunch pulled down NBC Universal’s parent as General Electric lowered its full-year financial guidance to investors early Thursday.
While GE’s problems are not with NBCU, the parent company’s woes will in all likelihood squeeze its media and entertainment arm as GE keeps a lid on costs to improve earnings.
Thursday’s financial alert by GE -- a mammoth $180 billion-revenue conglomerate with industrial and financial-services businesses -- is significant for the whole economy because GE is a blue-chip stock that is a component of the Dow Jones Industrial Average.
It’s also a reversal of position because in past months, GE insisted to investors that its large financial-services arm was mostly insulated from the housing-mortgage mess.
The Wall Street Journal said GE issued “a harrowing projection for the economy, predicting ‘that difficult conditions in the financial-services markets are not likely to improve in the near future.’”
GE said “unprecedented weakness and volatility in the financial-services markets” means it will suspend its stock buyback and likely not raise its stock dividend, which would end a 32-year streak of increases.
Still, GE said its third-quarter projection is for $2 billion in profits from its financial-services businesses that “is expected to exceed the earnings of any financial-services company” but is a climb-down from past projections.
GE said its media business -- meaning NBCU -- is posting “excellent performance” in operations. “In our media business, the Beijing Olympics were an unqualified success in all respects for NBCU, and cable ratings remain very positive,” GE chairman and CEO Jeff Immelt said in a statement.
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