By Saabira Chaudhuri
General Electric Co.’s (NYSE:GE) first-quarter earnings rose 16%, catapulting results above Street views, as the conglomerate reported a gain from the sale of its remaining stake in NBC Universal, although revenue was flat amid weakness in the industrial segment.
Chief Executive Jeffrey Immelt has tried to reduce GE’s reliance on its financial arm in the past few years while boosting the company’s industrial businesses, which investors tend to value more highly. GE has struggled to improve the profit margins at its industrial businesses given the difficult economic environment.
Friday, the company said revenue from its industrial businesses, which include energy infrastructure and aviation, fell 5.7% to $22.67 billion. Profit from the businesses was down 11% to $2.94 billion.
Mr. Immelt said the company’s markets were “mixed” as the U.S. and growth markets were in line with expectations, but industrial segment revenue in Europe was worse than expected. Overall, power and water markets were worse than expected, and GE saw additional pressure in European power and water services, which also impacted margins.
Still, Mr. Immelt said the company had “always anticipated that the first half of 2013 would be our toughest comparison,” and that GE expects power and water to improve during the year and be positive in the second half. GE ended the quarter with its biggest equipment and services backlog ever at $216 billion.
Revenue from GE Capital rose 1.7% to $11.54 billion, while profit rose 8.7% to $1.93 billion.
GE reported a profit of $3.53 billion, or 34 cents a share, versus $3.03 billion or 29 cents a share, a year ago. Results included a one-time gain in industrial operations of eight cents a share from the sale of GE’s remaining stake in the NBCUniversal joint venture that was partially offset by four cents a share tied to restructuring and other charges. The company’s operating earnings, which exclude pension costs, were 39 cents compared with 34 cents.
Revenue was flat at $35 billion.
Analysts polled by Thomson Reuters had expected earnings of 35 cents and $34.51 billion in revenue.
Costs and expenses edged down 0.8%.
In February, Comcast Corp. (CMCSA, CMCSK) agreed to buy GE’s remaining 49% stake in the NBCUniversal joint venture for about $16.7 billion, in a deal that gave GE gives a healthy stockpile of cash to return to shareholders and to invest in its industrials business.
Industrial power, oil and gas, and other infrastructure-related businesses are central to the growth plans of the company’s nonfinancial businesses as it continues to shrink its GE Capital arm.
Earlier this month, GE confirmed it agreed to buy Lufkin Industries Inc. (LUFK) for about $3.3 billion in cash to further expand an oil and gas business that GE has built up via a string of acquisitions in recent years.
Shares rose by 21 cents to $22.88 in recent premarket trading. The stock has risen 18% in the past 12 months.
IBM profit machine slows; layoffs planned
By Drew FitzGerald
NEW YORK (MarketWatch) — International Business Machines Corp. signaled plans to trim its work force after some software and mainframe computer sales fell short of expectations, causing its core earnings growth to slow.
IBM (NYSE:IBM) shares fell nearly 5% in after-hours trades, as earnings and revenue missed analysts’ expectations, a rare event for a company that usually grows its core profit even when sales lag.
“The stressors are finally starting to appear on the model,” ISI Group analyst Brian Marshall said. “Investors have been pretty used to the fact that they deliver double-digit earnings growth. Well, for the first time in a long time, they didn’t do that.” IBM said its earnings, excluding certain costs, rose a relatively slow 3.4%.
Separately, IBM is in advanced discussions with Lenovo Group Ltd. (OTN:LNVGY) to sell part of its computer server business, The Wall Street Journal reported, citing people familiar with the matter. At issue is IBM’s business of selling so-called x86 servers, the low-priced workhorses of many corporate and cloud-based data centers.
An exact sale price is not known, WSJ reported, but one of the people said the deal could be worth billions of dollars.
IBM’s results are often read as an indicator of the health of tech spending among government and corporate customers. In recent quarters, the tech giant’s overall revenue has been hurt by weak tech spending and economic uncertainty. But the company has been pushing the growth of its higher-margin software and services businesses, while shedding less profitable lines and cutting costs.
At the same time, IBM has invested heavily in emerging markets, generally helping results in recent periods. In the latest quarter, revenue in IBM’s growth markets, which include Brazil, Russia, India and China, declined 1%.
Overall, IBM reported a profit of $3.03 billion, or $2.70 a share, down from $3.07 billion, or $2.61 a share, a year earlier. Operating earnings, which exclude retirement-plan costs and amortization, rose to $3 a share from $2.78.
Technology and consumer stocks led the market’s decline following a basket of lackluster earnings reports. Chris Dieterich reports.
Revenue fell 5.1% to $23.41 billion, or 3% when adjusted for currency fluctuations.
Analysts most recently predicted earnings of $3.05 a share and revenue of $24.62 billion.
Gross margin widened to 45.6% from 45.1%.
Revenue in IBM’s systems-and-technology unit, which includes its hardware business, fell 17%, its sixth-straight quarter of declining sales performance. Some of the shortfall stemmed from the lack of a retail point-of-sale hardware that the company divested last year, though Loughridge said several profitable mainframe deals “fell short of the goal line” last quarter.
“For systems and technology, this was not the quarter we expected,” he said during a conference call with analysts.
Software revenue eased 0.5%, also hurt by the absence of some highly profitable deals last quarter. Technology services revenue decreased 4.3%, while business services revenue fell 3.3%.
Services backlog increased to $141 billion from $140 billion in the fourth quarter.
Revenue in the Americas–IBM’s largest market–fell 4%, or 3% adjusting for currency impacts.