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KKR and Blackstone Duke It Out; Both Lose

KKR and Blackstone issue dueling earnings reports Thursday, and both stocks suffer, as Blackstone's president makes cautious remarks about the IPO market.
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NEW YORK CITY (TheStreet) -- The publicly traded affiliate of Blackstone (BX) - Get Blackstone Inc. Report, the big private-equity shop, reported stronger-than-expected results Thursday before the opening bell, but investors were unimpressed.

During the regular session, Blackstone shares lost more than 6% to $14 on heavy volume and were moving lower still in after-hours trading.

Excluding charges, the company said it earned 16 cents a share in the second quarter, topping analysts' expectations of a 9-cent profit. The charges were to account for acquisition and IPO expenses of nearly $200 million.

Including those items, Blackstone lost money, to the tune of $164 million, or 60 cents a share. A year ago, it posted a bottom line of $156.5 million, or 60 cents a share.

Revenue rose to $406.4 million from $354 million a year ago.

Investors were perhaps reacting to comments from Blackstone's president, Tony James, on a conference call to discuss earnings. James said not to expect too much in the way of exits in the near future; he said the firm would err on the side of caution.

Private equity firms such as Blackstone make their money by pooling investor funds, buying companies with those funds, and then selling them for a profit (at least that's the hope) either through IPOs or to other companies or via a liquidation of assets. PE firms also take a "management fee" cut from the pool of funds that they oversee.

As it stands, in a market where IPOs have all but dried up, Blackstone has put its billions to work by buying up high-yield bonds, which can be lucrative.

Still, that's not a PE shop's core mission.

KKR, Blackstone's rival, on the other hand, has experienced much greater IPO activity. The firm has announced plans to take six of its portfolio companies public this year, including

Dollar General

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Avago Technologies


The publicly traded arm of the LBO house Kohlberg Kravitz & Roberts,

KKR Financial Holdings


reported results after the close Thursday.

The firm said net income was $20.6 million, or 14 cents a share, down from the year-ago period's $37.6 million, or 25 cents a share.

KKR shares took a beating during Thursday's regular session as well, losing 16% to $2.58, possibly following its rival's stock lower. After-hours, KKR clawed back at least some of those losses, advancing 2%.

-- Written by Scott Eden from New York

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