General Electric Marches On

Years of outstanding earnings growth and operating improvements continued apace at General Electric, the company announced today. While investors would rather Chairman Jack Welch never left his seat, book-pushers are lining up huge advances -- the most ever for a business book -- to get his memoirs into their publishing houses and his secrets out to the world.

By Robert Brokamp (TMF Bro)
July 13, 2000

General Electric (NYSE: GE) -- manufacturer of everything, including stuff for the kitchen sink -- announced second-quarter results this morning. Both revenues and profits clocked 20% growth, year over year. Earnings per share (EPS) sported a 21% yearly increase, to $0.34 from $0.28. And if those weren't enough 20s for you, operating margin improved to 20.4%, up from last year's 19.3%.

The Q2 EPS beat the First Call analyst estimate by a penny, which is par for the General's course. The company has not had a negative earnings surprise since 1994.

Though down a buck today (a frequent occurrence for the company on announcement days), GE has fared much better over the past 12 months than its Dow brethren. GE is up 40% over the past year, while the Dow is slightly submerged.

General Electric -- the world's biggest company, according to market capitalization -- is a case study on how a "mature" company can keep a spring in its step. GE does this through increased efficiency, global dominance, and exploring new opportunities. For example, did you know about GE's business-to-business e-commerce venture, GE Global eXchange Services? According to the website, it manages "the world's largest electronic community of more than 100,000 trading partners." General Electric already has extensive Internet exposure, most prominently through its NBC Internet (Nasdaq: NBCI) media aggregating site. And it has created more millionaires than Regis. All it needs is a "Reality TV" program, and it'll have capitalized on all the recent cultural trends.

Here are some of the recent developments from GE's sundry divisions:

• GE Aircraft Engines continued to be the leader in worldwide sales of airline jet engines, and they managed to win a contract for Italian helicopter engines, too. The division has moved closer to settling a labor dispute, as the International Association of Machinists and Aerospace Workers at the Evendale, Ohio, plant voted in favor of accepting a three-year deal. Another, larger union will vote soon on the offer.

• Over at GE Power Systems, orders for new power generators were up 80% sequentially. Heavy-duty gas turbines were also popular, seeing a 122% quarterly increase in shipments.

• GE Medical Systems teamed up with data storage king EMC (NYSE: EMC) to create a medical information storage system. According to the GE announcement, the system will "offer medical image archiving and Web-based distribution from mission-critical data centers."

• At GE Capital Services -- the largest non-bank financial services company in the world -- second-quarter earnings grew 17% to $1.3 billion. The division has filed with the Securities and Exchange Commission to sell up to $20 billion in debt securities, warrants, and preferred stock.

• Cisco (Nasdaq: CSCO) has teamed up with GE Industrial Services to create GE Cisco Industrial Networks. The company will specialize in network infrastructures for industrial operations.

• NBC announced that it expects to sell $1 billion worth of advertising for the upcoming Sydney Olympics. This is a significant increase from the $680 in ad spending during the Altanta Games. In other NBC tidbits, Media Matrix said that MSNBC.com was the most-visited news website this past May.

In other news, GE looks to get $1.5 billion from the recent sale of PaineWebber (NYSE: PWJ) to Swiss financial services company UBS (NYSE: UBS). GE was one of PaineWebber's biggest shareholders.

Finally, revered CEO Jack Welch, winner of Fortune's "Manager of the Century" award last November, will reportedly get a $5 million advance for a book he is writing. That would be the biggest ever advance for a business book. Welch is due to retire in April of 2001.

Your Turn:
Discuss GE's earnings report on our General Electric discussion board.

Related Links:

Dark Business Sky at NBCi, Fool Plate Special, 6/13/00

Dueling Fools, 2/10/99: General Electric

Feedback about News & Commentary? Please send mail to news@fool.com.