NBC Uni a black mark on GE's Q2 Unit's profit dips 10%; Immelt optimistic about upfront gains

NBC Uni a black mark on GE's Q2 Unit's profit dips 10%; Immelt optimistic about upfront gains

NEW YORK -- Media, industrial and finance conglomerate General Electric reported an improved second-quarter profit Friday, but its NBC Universal unit again underperformed other segments, bringing in the only year-over-year profit decline.

Overall, GE's second-quarter profit rose 4% year-over-year. However, profits at its NBC Universal segment declined 10% from $979 million in second-quarter 2005 to $882 million for the period ending June 30.

Revenue for NBC remained basically unchanged at $3.9 billion. But GE's revenue for the period ending June 30 increased 9% to $39.9 billion, and earnings from operations rose 11% to $4.9 billion. Earnings per share jumped 15% to 47 cents per share.

For the current third quarter, GE predicted double-digit profit growth for all of its business units except NBC Universal, where it expects a 5%-10% decline.

As he has done in recent quarters, GE chairman and CEO Jeff Immelt on Friday again addressed the NBC Universal "drag" on GE's financials, saying his team is seeing a light at the end of the ratings and advertising tunnel.

"Our expectations (for NBC) are on-plan, and we see good momentum as we enter the second half of the year," Immelt said in a conference call with analysts. He particularly glowed about NBC's cable ratings, "buzz around the upfronts" and "a diversified business model of content leveraged across all delivery platforms."

GE chief financial officer Keith Sherin said NBC Universal's results "came out exactly as we outlined (them)" and also reiterated previous guidance that the unit should see a turnaround in the fourth quarter.

For early signs of the turnaround, Sherin pointed to results from NBC's advertising upfront sales when looked at comprehensively. Including broadcast prime-time, the NFL and cable, NBC television upfront sales increased 0.5%, he noted, to generate $3.9 billion for the company.

"We're getting great early responses to our primetime lineup," Sherin said, highlighting the forthcoming dramatic series "Studio 60 on the Sunset Strip" and "Friday Night Lights."

Digital upfront sales for the NBC 360 arm brought in $300 million, Sherin said. Executives failed to give quantitative details about NBC Universal's online business beyond the upfronts and results from the deal to sell NBC programs via Apple's iTunes online store.

Discussing the NBC Universal film business, Sherin said the next two quarters should see lower costs than 2005 on the balance sheet.

Last year, NBC Universal spent heavily on "King Kong" ads and promotions. With nine releases slated for the current third quarter, including "You, Me and Dupree" and "Miami Vice," Sherin said the back half of the year would see "favorable comparisons" and the films would "drive profit and help (NBC Universal) go positive," generating a near-$3 billion in profits by the end of the fourth quarter.

GE's earnings news sent the conglomerate's shares down 1.7% to $32.11 after they went as low as $32.06 intraday, which set a new 52-week low. The stock previously traded at $32.06-$36.34 during the past 52 weeks.

Credit Suisse analyst Nicole Parent said in a report Friday that gains from the sale of four NBC owned-and-operated stations to broadcaster Media General were offset by restructuring costs in the latest quarter. After the earnings call, Parent predicted that margins will improve for GE overall this year and reiterated her "outperform" rating on the stock with a 12-month target price of $39.
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