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Text size [+][-]  Saturday November 21 2009GLOBAL EDITION

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25 Sep 2008 16:14

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General Electric cut its earnings forecast for the second time this year and suspended its stock buyback because of ``unprecedented weakness and volatility'' in financial markets. Full-year EPS will be $1.95 to $2.10 instead of the earlier projection of $2.20 to $2.30. GE shares have fallen 35% this year.

Chief executive Jeff Immelt said GE is working to decrease its reliance on finance, which accounted for 53% of profits last year. GE Capital will reduce the dividend it currently pays to parent GE from 40% to 10% of earnings and raise capital to reduce leverage.

 

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The conglomerate slashed its earnings forecast by up to $3.5bn this year because of the finance unit’s woes. GE is halting buybacks and will bolster the division’s capital and reduce leverage. These are the right steps, but should be the prelude to a divorce.

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