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MarketWatchGE slashes earnings view for 2008
To halt stock buyback to keep Triple-A rating; dividend maintained
LONDON (MarketWatch) -- General Electric on Thursday warned 2008 earnings may be as much as 15% lower than it earlier predicted and said it would halt a stock buyback program to maintain the Triple A credit rating so important to its financials business.
GE said "unprecedented weakness and volatility in the financials services market" led it to cut earnings estimates. It's now aiming to deliver 60% of its earnings from its industrial business and 40% of its earnings from financials by the end of 2009.
"Given the recent dramatic developments in the financial markets, we have made some tough decisions to further reduce risk and strengthen our balance sheet while maintaining our dividend. We have suspended the stock buyback to reduce GE Capital leverage, while still being able to pursue opportunistic acquisitions," said Chairman and CEO Jeff Immelt.
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GE, in a bid to maintain its Triple A credit rating, is cutting the dividend that GE Capital pays to the parent from 40% to 10% of earnings and is halting a stock buyback program. It's also reducing GE Capital's commercial paper to 10% to 15% of total debt.
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