As General Electric Co. opened the fourth quarter with promises of additional restructuring, its biggest contemplated change in the near term may be divesting half of its NBC Universal unit, as it reportedly negotiated with Comcast Corp. to create a joint venture.
GE revenue was down 20 percent in the third quarter to $37.8 billion, which the company attributed to divesting GE Capital assets, subsidiary NBC”™s telecast of the 2008 Olympics a year earlier, the impact of exchange rates and, of course, the impact of the credit crisis and recession on overall sales.
According to multiple reports GE has not confirmed or refuted, it is weighing divesting half of its NBC Universal subsidiary to Comcast, with the companies contemplating a joint venture. Any deal would require the approval of Vivendi, which holds a 20 percent stake in NBC Universal.
In a conference call with investors in mid-October, CEO Jeff Immelt did not deny GE was in talks on NBC Universal, but did not provide additional details.
“We expect this to be a ”˜reset world,”™ and it”™s a good time to be thoughtful about the portfolio,” Immelt said. “I don”™t have a specific pronouncement, or specific need for cash. In many ways we plan to operate (NBC Universal) over the long term, or partner if that accelerates the growth of the franchise. I wouldn”™t look at this as that much more than we what we”™ve done in the past.”
The company”™s profits were down by just over half to $2.5 billion. Earnings were impacted by GE spending $600 million during the quarter on restructuring moves, and is contemplating potentially more than $700 million in cuts in the current quarter and next year.
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GE has yet to provide full details on layoffs it has undertaken during the recession. The conglomerate is among the largest employers in Fairfield County, though it has shed or relocated more than 1,000 workers from local offices the past few years.
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After two straight quarters of decline, GE reported its backlog rebounded to a record $174 billion, however, representing planned purchases of equipment and services the company has yet to deliver. Customers canceled about $200 million in orders during the quarter, and about quadruple that amount for the year to date.
GE said it has yet to reap the full impact of federal stimulus spending, which is expected to spur orders in its rail, wind turbine and health care information technology product lines, among others.
GE”™s Norwalk-based subsidiary GE Capital saw revenue drop 31 percent, with a deconsolidation of its Penske Truck Leasing Co. L.P. partially affecting its results. The unit”™s $173 million profit was down from more than $1.8 billion in the third quarter of 2008. Delinquent loans owed GE Capital continued to creep up on both the commercial and consumer side of the business, though delinquencies showed signs of leveling off.
“I would say even in real estate there”™s been $50 (billion) or $60 billion raised by (real estate investment trusts) and other funds,” Immelt said. “We see some of that starting to bleed through into the markets. There”™s liquidity. I think delinquencies seem to be leveling but it”™s hard to call exactly when that”™s going to take place.”
On the flip side, GE”™s energy infrastructure unit had a 14 percent gain in profits to $4.6 billion, as sales rose 11 percent to nearly $1.6 billion. The unit expects a large order from Kuwait to finalize in the fourth quarter.
