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Feather in GE’s cap

Peacock profits rise 26%, pump parent

NBC continues to be the economically resilient engine behind the growth of parent industrial conglom General Electric, as the Peacock unfurled operating profits up 26% to $688 million for the second quarter compared to the same period last year.

In an earnings call with analysts Friday, CEO Jeff Immelt praised the broadcast unit for a better-than-expected quarter and predicted the resilient TV group would also be one of the company’s stronger performers in the third quarter. He projected 15%-20% earnings growth.

Immelt declined to offer up more details on GE’s proposal to merge NBC with Vivendi Universal Entertainment beyond confirming that the company would pursue a deal only if it’s in the interest of GE shareholders. “There are a lot of aspects about Vivendi that would make sense for NBC, to strengthen our positions,” said Immelt.

Despite the sluggish marketplace, GE maintains a triple A balance sheet that is the envy of many companies, including Viv U, which could benefit from its strong credit rating if the Gallic firm opted to enter a joint venture with NBC instead of taking an immediate cash offer for VUE from other bidders.

One advantage of a VUE joint venture for GE would be the opportunity to realize the value of NBC in a separately traded company. Peacock could be worth $30 billion-$40 billion on its own and up to $60 billion with the VUE assets.

Analysts believe a play on VUE makes sense in the context of GE’s ongoing plans to reshape its portfolio around its higher growth businesses, such as NBC. GE is in the process of divesting some $15 billion in underperforming units as part of its corporate re-focus.

Upfront pumps Peacock

NBC’s buoyant quarter was aided by robust ad pricing improvements and a strong scatter market. In the recent upfront ad sales futures market, the company said it won a record $3 billion-plus in primetime commitments, taking a third of overall market growth. Total NBC 2003-04 upfront volume was $4.8 billion.

Among the company’s various feats, GE brass noted that the Peacock won its third consecutive primetime season victory in adults 18-49, boasted the season’s top four comedies, the Nos. 1 and 3 dramas and an 11% increase in ratings overall (excluding sports) over 2002.

Company also noted that biz news channel CNBC had increased viewership 35% over last year among adults 25-54 while MSNBC’s primetime viewership rose 67%.

Revenues at NBC were actually down 2% over the same period last year since it gave up NBA broadcasts, which accounted for $223 million in sales in the second quarter last year but delivered little marginal profit. Excluding the NBA sales, revenues increased 11% to $1.96 billion for the quarter.

Not so good things

Investors looking for signs of an economic rebound from bellwether GE’s fortunes otherwise found little to cheer about, as for the second year in a row, steady earner GE predicted only single digit growth (an anemic 3%-7%) for 2003.

Times are still tough for the vast industrial combine, as the company on Friday reduced expectations for its full year 2003 profit and reported second quarter earnings down 14% to $3.8 billion over the same period last year due in part to continuing challenges in the plastic business and a recession-induced slump in gas turbine shipments. Total sales for the quarter were virtually flat over a year ago at $33.37 billion.

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