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General Electric posted revenue that missed Wall Street's expectations on Friday, overshadowing better-than-expected earnings and sending its shares down sharply.
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The biggest U.S. conglomerate's sales fell 20 percent—down across all its businesses, which range from selling railroad locomotives to making commercial loans to running the NBC Universal media business.
It noted that orders, an indicator of future sales, also fell.
Big industrials including GE have slashed costs aggressively through the worst downturn the United States has experienced since the Great Depression.
With the recession starting to come to an end, investor attention is turning to the question of when revenue growth will return.
"The focus has been on revenues, not earnings," said Jack De Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire, which holds GE shares in client portfolios. "From here on out, we need some revenue growth. And revenue was light."
GE officials told investors on a conference call that part of the reason revenue declined so much was that the company has moved faster than it expected in downsizing GE Capital, which has been its weakest unit during the downturn.
"We are shrinking GE Capital faster than we had planned," Chief Executive Jeff Immelt said. "We think that's on strategy, and as we do that the GE Capital revenues decline accordingly."
GE shares [GE
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] fell sharply on the New York Stock Exchange, weighing the broader stock indexes lower.
Better-than-expected recent results from fellow U.S. blue chip Alcoa [AA
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] and Dutch conglomerate Philips Electronics had raised investor hopes for GE.
The world's No. 1 maker of jet engines and electricity-producing turbines said third-quarter profit fell 42 percent to $2.49 billion, or 23 cents per share, down from $4.31 billion, or 43 cents per share, a year earlier.
Factoring out one-time items, profit came to 22 cents per share, above the 20 cents analysts had forecast, according to Thomson Reuters I/B/E/S.
Revenue fell 20 percent to $37.8 billion, below the $39.5 billion analysts had expected.
It noted that orders were down 18 percent to $18.4 billion, though its total order backlog stands at $174 billion.
On the profit side, GE Capital remained the weakest segment, recording an 87 percent drop in earnings. But the company noted that every sub-segment of the finance arm, which has businesses including commercial lending and aircraft leasing, was profitable except for real estate.
Profit was up at its energy, NBC Universal and consumer and industrial segments.
Vivendi SA, which owns 20 percent of NBC Universal, may opt to sell its stake in that business this year. Immelt said GE is preparing for a possible IPO of the business, or considering taking on another partner.
Sources have said that No. 1 U.S. cable company Comcast [AA
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] is in talks with GE about taking a stake in NBC. Both companies have declined comment on that possibility.
GE has faced falling demand for its big capital equipment. But so far this year it has counted on revenue for maintaining products it has already sold to boost results.
At the same time, it has been cutting back its GE Capital finance arm, which had invested heavily in commercial real estate and has been hard hit by the credit crunch.
GE shares are up roughly 4 percent so far this year, trailing the 15 percent percent rise of the Dow Jones industrial average.
The past year has been a wild ride for GE shareholders, who have seen the stock briefly tumble to an 18-year-low under $6 per share, before rebounding back to its current level.
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