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General Electric Co. reported a 44% drop in quarterly profit Friday (Jan. 23) on weakness at GE Capital and its lighting and appliance units, and warned that 2009 would be “extremely difficult.”
Reuters reported that its shares tumbled nearly 11% to their lowest point since early 1996 as investors continued to worry about the U.S. conglomerate’s ability to maintain its dividend.
GE Capital – the company’s Achilles heel for the past year – remained the biggest drag on its results, with profit tumbling 67%. GE’s energy infrastructure unit, which makes electric turbines and windmills, was the highlight, recording 11% profit growth.
Chief Executive Jeff Immelt said on Friday the result – which met Wall Street’s reduced expectations – reflected brutal economic conditions.
“We’re planning for a really tough environment,” Immelt told analysts on a conference call. “The recession is tough, the financial services crisis is worse.”
Investors have become increasingly concerned over the past month that the world’s largest maker of jet engines may have to sacrifice its $1.24 per share annual dividend.
Analysts also are asking whether it could lose its coveted top-tier credit rating, after Standard & Poor’s lowered its outlook to “negative” in December.
“GE is not fully out of the woods and macro uncertainties continue to point to continued risk for the dividend and AAA-rating,” said Goldman Sachs analyst Terry Darling.
Immelt, 52, defended the dividend, calling it “a good return to investors in this moment of uncertainty. But we’re not straining in order to pay it … We’ve got lots of cash.”
GE shares closed down $1.45 to $12.03 on the New York Stock Exchange, making it one of the heaviest drags on the Dow Jones industrial average. The Dow was off more than 1 percent earlier, before closing down 0.56%.
Over the past year, GE shares have tumbled about 60%, sharply outpacing the 32% fall of the Dow.