Apr 18, 2009 (Milwaukee Journal Sentinel - McClatchy) -- General Electric Co. reported a 35 percent drop in first-quarter earnings and 9 percent drop in revenue Friday, with the medical systems division contributing to the declines along with GE's struggling media and financial-services businesses.
In a conference call with investors, GE Chief Executive Officer Jeff Immelt said the outlook for GE Healthcare Ltd. is murky for the remainder of 2009. While GE Healthcare orders in China rose 23 percent in the quarter, business in the United States for diagnostic imaging equipment receded as government agencies tighten reimbursements for imaging services.
GE Healthcare's Diagnostic Imaging business, known as the D.I. unit, is based in Waukesha. "The U.S. D.I. equipment market is going to be at a lower level," Immelt said. "It's going to be at a lower level maybe for an extended period of time."
GE, which has a stake in almost every sector of the economy, from light bulbs and credit cards to windmills, reported net income of $2.74 billion, or 26 cents a share, after paying preferred dividends. That was down from $4.30 billion, or 43 cents a share, a year earlier.
Earnings from continuing operations surpassed Wall Street expectations of 21 cents a share. Shares of the Fairfield, Conn.-based company rose 12 cents to close at $12.39.
Breaking out the figures by division, Healthcare reported a 9 percent drop in sales to $3.5 billion and a 22 percent decline in earnings to $411 million. The Healthcare division began cutting jobs at the start of the year. GE officials did not provide more details about the job reductions.
Asked about the full-year outlook for Healthcare, Immelt called it one of the most difficult divisions to forecast: "Healthcare is probably the one with the least visibility right now."
Earnings at GE's entertainment and media group, NBC Universal, slumped 45 percent to $391 million. The company's troubled finance arm, GE Capital, earned $1.1 billion, a decline of 58 percent from a year ago. GE said it's shrinking the unit to make it more focused and profitable.
While most of GE's segments struggled, its divisions that make power plant turbines, sell products to the oil and gas industries and build jet engines managed to turn profits, helped by servicing customer equipment rather than new purchases.
But those results couldn't quite compensate for drops in its entertainment, consumer and health care operations, as a deep recession continues to eat into appliance purchases, advertising and hospital budgets.
Immelt said the conglomerate is doing its best to navigate through the recession while trying to limit the damage from factors such as GE Capital's growing losses.
"We are operating in this environment the way investors would want us to," Immelt said.
GE believes it won't have to raise new capital to prop up GE Capital, which finances everything from credit cards to commercial real estate. That unit has worried investors as credit and property markets seized up over the last year.
GE endured some historic setbacks during the first quarter, most caused by GE Capital. In late February, GE slashed its dividend by 68 percent, a move expected to save $9 billion in cash but its first dividend cut since 1938. Two weeks later, GE lost its coveted top-rank AAA credit rating from Standard & Poor's.
The finance arm remains a major concern, even as GE scales back the unit's operations and limits the amount of earnings it expects to generate from the former profit driver. Analysts pointed out Friday that without a big boost from taxes, GE Capital would have posted a loss of $153 million in the first quarter. With the tax benefit, its earnings slid 58 percent to $1.12 billion.
The company gave investors an exhaustive review of GE Capital's finances in March, attempting to rebuild confidence following a slide in GE's share price, which is down 24 percent since Jan. 1 and has fallen 62 percent in the past year.
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