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Turbines Still Sapping GE's Power

It announces another quarter of lower earnings and announces a $9.5 billion overseas buyout.
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General Electric

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said third-quarter earnings slipped both before and after an accounting charge in the latest quarter, and the company unveiled a $9.5 billion takeover of British medical company Amersham PLC.

Fairfield, Conn.-based General Electric earned $3.65 billion, or 36 cents a share, on revenue of $33.39 billion in the latest quarter, compared with earnings of $4.09 billion, or 41 cents a share, on revenue of $32.72 billion in the year-ago quarter. The latest period had a $372 million accounting charge, before which GE earned $4.02 billion, or 40 cents a share.

On a pre-accounting charge basis, analysts surveyed by Thomson First Call were forecasting earnings of 40 cents a share on revenue of $32.43 billion.

It was GE's fourth consecutive quarterly earnings decline. Eight of the company's 13 businesses -- commercial finance, consumer finance, consumer products, insurance, medical systems, NBC, specialty materials and transportation -- had double-digit earnings growth in the period, year-over-year. The big drag on earnings was GE's huge power-systems division, which was hurt by a decline in sales of large gas turbines in the U.S.

GE said that with power systems and pension income backed out, per-share earnings would have risen 14% in the latest quarter over last year.

Top-line growth was fueled by a 13% rise in financial services revenue to $17 billion, partially offset by a 5% dip in industrial sales to $16.5 billion, reflecting the turbine softness.

The company said it expects to earn 45 cents to 47 cents a share in the fourth quarter, compared with the consensus estimate is 47 cents and $1.55 to $1.57 a share for the full year, compared with the consensus of $1.57 a share.

Shares were recently down 51 cents, or 1.7%, to $29.62 on the Instinet premarket session.

As for Amersham, GE will exchange stock worth $9.5 billion for all of the U.K.-based diagnostics and life-sciences company, representing a roughly 45% premium over its Oct. 7 quote. GE will combine the company with its GE Medical unit, creating a $13 billion division to be headed by Amersham's Sir William Castell.

General Electric expects the acquisition to be non-dilutive to 2004 per-share earnings, although it will result in an in-process research and development charge. The deal is seen adding a penny a share to earnings in 2005.