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When General Electric sent out news of its earnings shortfall this morning, the surprise wasn’t so much in the numbers. With its extensive financial and consumer-oriented businesses, the company was bound to feel some impact from recent turmoil.
What surprised everyone was the lack of warning. Investors didn’t see it coming, nor did analysts, journalists or practically anyone beyond GE’s leadership team. Less than a month ago, CEO Jeff Immelt was buying up 62,000 shares on the open market. He was telling investors that GE is positioned to keep winning in a global economy. On a March 13 Webcast, he reaffirmed the earnings targets for the quarter. Two days later, as he put it today, “the Bear Stearns situation took place.” And all bets were off.
Never mind that a number of analysts and high-profile investors are now in a huff, talking about ‘credibility’ issues because they were kept in the dark. GE, after all, is normally so fastidious about managing expectations.
But the earnings announcement came so close to the Bear Stearns collapse that it probably made some sense to get it all out today. Dribbling out a few sullen comments to the press or having the chief appear pensive in public probably wouldn’t have averted a sell-off today.
What’s intriguing to me is the fact that the events of the past few weeks could wreak such havoc on GE’s bottom line. This is a diversified global conglomerate that has been acutely tuned in to the turmoil on Wall Street. Could its fortunes (or, rather, its perceptions of its fortunes) really turn around that fast? Immelt doesn’t tend to sugar-coat bad news. The biggest surprise may be that he didn’t see this coming either.
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