Business & Money News

NEW YORK: David Nissen, the head of GE Money, remembers how the corporate bosses used to react whenever the subject of joint ventures came up. “The basic philosophy was, If you dont have full control, dont do the deal, ” Nissen recalled.

How times have changed. In South Korea, GE Money, GEs retail lending arm, has 43 percent stakes in Hyundai Capital and Hyundai Card, which offer auto loans, mortgages and credit cards.

It has formed joint ventures with several Spanish savings banks to provide consumer loans and credit cards. And it has a consumer banking venture with Garanti Bank in Turkey, in which GE and the Dogus Group, Garantis parent, each own 25.5 percent, with the rest owned by outside investors. Garanti manages that venture.

Joint ventures “have been one of our most powerful strategic tools,” Nissen said, noting that net income for the ventures was growing at twice the rate of his core business.

He was speaking for GE Money, but he could easily be speaking for General Electric as a whole. In the past few years, GE has shown an ever greater willingness to hook up with other companies, even if that means taking a minority position.

“Sure, we could keep buying small companies and GE-ize them,” said Jeffrey Immelt, GEs chief executive. “But weve learned that its better to partner with the No. 3 company that wants to be No. 1 than to buy a tiny company or go it alone.”

At GE, that attitude is a cultural shocker. Even Immelt concedes that “our culture is based on the idea that our management approach is right.”

But managerial imperialism is a luxury GE can no longer afford.

“They need to be in more geographic and technological markets, and joint ventures let them spread both risk and capital around,” said Daniel Rosenblatt, an analyst at Marble Harbor Investment Counsel, which owns GE shares.

In fact, GEs new openness to joint ventures is a culmination of myriad converging trends.

For one thing, the days when it could buy whatever it wanted are pretty much over.

“GE used to be the 900-pound gorilla with the magic bag of money,” said James Schrager, clinical professor of entrepreneurship at the Graduate School of Business at the University of Chicago. “But these days, if theres a neat company for sale, the private equity people offer the highest price.”

GEs global push is a factor, too. This year, for the first time, GE will derive a majority of its revenue from overseas. Much of the incremental growth will come from areas in which GE has had a paltry presence, as well as from countries like China, where the economic and legal systems are in flux.

“When you dont know how the local laws will go, then joint ventures are the low-risk, high-return strategy for entering new markets,” said Deane Dray, an analyst at Goldman Sachs.

But perhaps most important, Immelt has repeatedly promised to keep GE growing faster than the domestic economy. For a company whose revenue Topped $160 billion last year, that is no small task. By taking partial ownership of a lot more companies than it could buy outright, GE is enhancing chances for a breakout hit and lessening the damage of an outright flop.

GE has done joint ventures before, of course. It has a longstanding 50-50 venture with the French state-owned aircraft engine maker Snecma, and another with Fanuc of Japan to make controls for electrical equipment. GE SeaCo, which GE and Sea Containers of Britain formed nine years ago, has become one of the worlds largest leasers of shipping containers. And MSNBC started out as a joint venture with Microsoft. (GE bought Microsoft out last year, but the two companies still jointly run MSNBCs digital operations.)

But those ventures came about only after GE had explored other possible ways to gain access to a particular market or technology.

“We used to go into talks saying acquisition, with joint ventures a distant second choice,” said Pamela Daley, senior vice president for corporate business development. “But we now see JVs as a great way to dip a toe into a new market.”

Examples are rife.

A few months ago, GE briefly considered bidding for Dow Jones - but only in partnership with Pearson, which owns The Financial Times. NBC Universal - itself a joint venture, formed in 2003 with Vivendi, which owns 20 percent - has teamed up with News Corp. to form Hulu.com, a video-sharing Web site, “and at one point we even tried to bring in a third partner, because the more content the better,” said Jeff Zucker, chief executive of NBC Universal.

December 27, 2007 — Still scarred from his ill-fated bailout of Salomon Brothers 20 years ago, Warren Buffett says he’s not interested in rescuing any more Wall Street titans from troubles of their own making.

Buffett, 77, America’s second-richest investor, yesterday said he’s been approached on behalf of stressed-out investment banks for bailouts in the current housing recession and credit freeze, blamed on junk mortgage paper created by the banks.

The crisis has forced several banks to travel hat in hand to the Middle East and Asia in search of nearly $20 billion in cash infusions, including Goldman Sachs, Citigroup, Merrill Lynch and Bear Stearns.

It’s strikingly similar to the hard times of 1987, when Goldman, Bear and Lehman Bros.’ forerunner went to Japan, and Salomon tapped Buffett, for their bailouts - just weeks ahead of the stock market crash of 1987.

“We’ve seen some deals, as you can imagine, in this period,” he said yesterday on CNBC, without identifying the banks.

“So far, we have not seen a deal that causes me to start salivating.” Buffett earlier denied reports he’d been offered a 20 percent stake in Bear Stearns for a bailout.

Buffett’s first investment in a Wall Street giant - his biggest investment ever at the time - came just a month before the crash of 1987. He poured $700 million into Salomon in a white knight rescue to quash an unwanted bid from upstart raider Ron Perelman.

However, Buffett got burned when Salomon

disclosed a surprise $70 million write-off from bad junk bond trades and the bank withdrew from its top business of municipal underwriting.

It wiped out a third of Buffett’s investment and sent tremors through Wall Street that days later triggered the biggest crash since the Great Depression.

But the worst for Buffett came in 1991 when Salomon admitted to illegal bid-rigging in government bonds, forcing top management to resign, and causing the firm to be barred from government auctions.

Buffett temporarily deserted Berkshire Hathaway for nearly a year to restore Salomon’s image and finally unload it to his friend Sandy Weill in 1997.

It wasn’t a total loss for Buffett. Weill and his Travelers Group paid $9 billion in Travelers stock for Salomon, in which Buffett owned 18 percent, a stake worth $1.7 billion - more than double his original investment.

Buffett - aware that today’s market anomalies are similar to those in 1987, with Wall Street choking on its bad investments and reaching abroad for bailouts - is still cool toward investment bank risks. paul.tharp@nypost.com

There’s a reason Warren Buffett’s company holds more than 35 million shares of Anheuser-Busch. ()

It’s called consistency over time.

Anheuser’s annual earnings grew in seven of the past eight years, and analysts project the performance will be nine out of 10 by the end of 2009.

Anheuser-Busch receives a solid 6 in IBD’s EPS Stability Rating, which varies from 1 to 99 with 1 being the most stable.

Its dividend stability is one of the best possible.

As of Friday, the dividend yield was about 2.8%.

Although an investor can find stocks with juicer payouts, Anheuser-Busch’s dividend policy is more generous than the current yield might indicate.

As Chief Financial Officer W. Randolph Baker pointed out to IBD Friday, Anheuser-Bush has raised its dividend 31 years in a row.

If an investor bought Anheuser-Busch 15 years ago, the dividend would now be almost four times what it was then. The yield on the original investment would be 9%.

In that period, the stock price rose 230% vs. 207% for the S&P 500.

But for income investors, the dividend is the focus. Who wouldn’t like a 9% yield in today’s climate?

That’s the big plus for dividend investing. When the market is stingy to downright bearish, the income investor can collect a fat yield on a move made years ago.

Although Anheuser-Busch is a mature firm, it is not stagnant. It has a 97% interest and a 27% stake in two Chinese breweries. It plans to build another brewery in China this year.

Domestic beer makes up 75% of sales and foreign markets 7%. Making beverage cans and operating theme parks Anheuser is the second-largest theme park operator in the U.S. account for the rest.

Watch today’s Markets Desk video.

The Nasdaq dropped 2.8% in midday trade Thursday, as its shine as the market’s sweetheart faded.

Since the confirmed rally began on Aug. 29, the tech-heavy index had taken a leadership role. While the other indexes took trips to their 50-day moving averages on recent turbulence, the Nasdaq remained above that key support level.

At 12:57 p.m. ET, the Nasdaq was under the 50-day. The S&P 500 was down 1.1%, and the blue-chip Dow shaved off 1.2%. Volume was higher on the Nasdaq and the NYSE.

The news of the day offered little help to the market. Oil prices rose to near $98 as weather shut down some North Sea oil platforms and a fire hit a Texas refinery.

Fed Chairman Ben Bernanke told Congress oil prices and the housing slump would slow economic growth considerably in the coming months. He gave no hint on what the next move on interest rates would be, but said recent problems will be overcome by the second half of 2008.

The stock market began to dent the markets leaders.

Among the rally’s marquee names, Chinese Internet stock Baidu.com () dropped 33.32 to 361.48. Google () shed 41.20 to 691.74. Apple () fell 8.74 to 177.56. Research In Motion (), which defied yesterday’s downtrend, succumbed Thursday. It lost 10.72 to 122.31.

Other losers on heavy volume included Hansen Natural (), down 17.28 to 39.39, and Sothebys (), down 16.37 to 33.70.

Some stocks resisted the downtrend. Gainers on big volume included First Solar (), which gapped up 51.48 to 218.60 after trouncing views, and Foster Wheeler (), up 10.25 to 156.26.

11:15 a.m. ET Update: Stocks Turn Mixed; Techs Bleed

By Vincent Mao

The major stock indexes were mixed in morning trade Thursday. Selling continued to be focused on big-name tech issues.

At 11 a.m. ET, the Nasdaq 100 sank 1.2%. The Nasdaq composite dropped 0.9%. But the New York composite gained 0.6% and the S&P 500 edged up 0.1%.

Volume was tracking higher on both exchanges.

Netease.com () gapped down 3.01, or 13%, to 19.27 in fast trading. Last night, the online gaming and entertainment firm reported third-quarter earnings of 27 cents a share, down 7% from a year ago, but 2 cents shy of views.

Hardinge () sliced its 50-day moving average, tumbling 11.15, or 38%, to 18.80. The maker of metal cutting machines reported Q3 earnings below analysts’ estimates.

On the upside, Ctrip.com () jumped 2.75 to 59.85 in heavy trading. Late Wednesday, the online travel firm delivered a 73% rise in Q3 earnings, trouncing views. This morning, Bear Stearns started coverage with an outperform rating.

Urban Outfitters () gapped up, gaining 1.07 to 25.88. Before the open, the clothing retailer reported Q3 earnings above views. The company also reported an 8% rise in Oct. same-store sales.

10:15 a.m. ET Update: Techs Take Heat In Early Trade

By Vincent Mao

Stocks were down in early trading Thursday with big-cap tech stocks taking most of the heat.

At 10:08 a.m. the Nasdaq 100, which excludes financials, tumbled 1.2%. The Nasdaq composite lost 1%. Meanwhile, the Dow fell 0.4% and the S&P 500 eased 0.2%.

The NYSE composite rose 0.3% and the small-cap S&P 600 edged up 0.1%.

Stocks headed further south after Fed Chairman Ben Bernanke largely reiterated last week’s Fed statement. He said housing woes will “intensify” but the U.S. economy is “resilient.”

Lawmakers are likely to grill Bernanke over mortgages and the weak dollar.

High-profile tech leaders, Research In Motion (), Apple () and Oracle () are all trading lower, with Oracle down 8%, plunging below its 50-day average. VMWare () is down 7%, working on its 6th straight decline.

Big-tech firms may be falling after Cisco reported weaker tech orders from financial firms.

Sotheby’s () gapped below its 50-day and 200-day moving averages. Shares dived 14.38, or 29% to 35.69. Sales from one of the auctioneer’s events came in below estimates. Banc of America Securities cut the stock to neutral from buy.

Hansen Natural () gapped down and slumped 14.87, or 26%, to 41.80. The maker of Monster Energy drinks reported Q3 earnings and sales below views.

On the upside, First Solar’s blowout results brightened the entire sector.

Suntech Power () gapped up and soared 7.41 to a new peak of 72.21 in brisk trading. The maker of solar power cells reports on Nov. 15. Thomson Financial expects 28 cents a share on sales of $355 million.

JA Solar () gapped up, surging 8.08 to a new milestone 68.20. The Chinese solar cell maker will announce earning before the open Friday. Analysts see profit ramping up 227% to 36 cents a share.

9:15 a.m. ET Update: Stocks Headed For Split Open

By Vincent Mao

Futures pointed to a mixed open Thursday as stocks look for some redemption after the prior session’s huge sell-off. Nasdaq futures fell 4 points vs. fair value, but S&P 500 futures gained 5 points and Dow futures 62 points.

In economic news, initial jobless claims fell by 17,000 to 317,000, the lowest in a month. But the 4-week average rose to a 6-month high.

Fed chairman Ben Bernanke will speak before the Joint Economic Committee at 10 a.m. ET.

The dollar lost ground against the euro, but rose against the yen.

Crude oil edged higher. The December contract rose 43 cents to $96.80 a barrel.

BHP Billiton () offered to buy rival mining firm Rio Tinto () for $110 billion, but was rebuffed. Rio Tinto shares shot up 30% in pre-market trading. BHP edged higher.

Cisco Systems () fell 7% in the preopen. Late Wednesday, the networking giant reported fiscal Q1 profit above views. But its Q2 sales guidance disappointed.

First Solar () rocketed 29% in the premarket. After Wednesday’s close the solar panel trounced views with a 600% surge in Q3 earnings. Sales also came in well ahead of estimates. The company also said it finished work a German facility ahead of schedule.

Morgan Stanley () rose 4% in pre-open trading despite announcing that it would write down $3.7 billion in subprime-related debt. The brokerage’s shares had fallen 24% so far this month on fears of more write-downs.

Citigroup () and Merrill Lynch () also warned of large write-downs recently.

A number of the nation’s retailers reported October same-store sales, which were mostly weak. Many retailers see profit in line or above Wall St. estimates though, as they controlled inventory and kept markdowns to a minimum.

Target () reported a 4.1% jump in its October same-store sales, topping views of 2.4%. Last month, the discount retailer trimmed its sales forecast to 2%-4% from 3%-5%. Shares were indicated higher.

Costco’s () October same-store sales climbed 9%, easily beating estimates. Shares rose about 1% in the premarket.

Zumiez () plunged 25% in the preopen. The action sports apparel and accessories retailer reported a 5.1% rise in same-store sales, shy of the 6.7% expected by analysts. Zumiez also trimmed its Q3 and full-year earnings outlook.

After the bell Priceline.com () will report results. Analysts expect profit of $1.28 a share on sales of $387.5 million.

With Microsoft («www.businessweek.com»), Google («www.businessweek.com»), and Yahoo! («www.businessweek.com») ensnared in troika-like machinations, how should investors approach this intriguing triangle? Some of the smart-money pros think this unprecedented battle of the tech titans could produce solid returns for their portfolios, if played adroitly.

Microsoft’s hostile $44.6 billion bid to gobble up Yahoo has forced Google to engage the software giant in a battle to protect its turf in search. (The deal’s current value is $41.5 billion, based on a drop in Microsoft shares since the Feb. 1 announcement.) Regulatory issues would stymie any attempt by Google, the No. 1 Internet search engine, to launch a rival bid. Nonetheless, Google is determined to stop any Microsoft-Yahoo deal, and one way to accomplish that is to convince Yahoo to form an alliance in Web search. Yahoo is No. 2 in that lucrative business.

Yahoo’s stock skyrocketed from $19 a share to $28 after Microsoft unveiled its not-too-unexpected designs. Microsoft’s cash-and-stock offer is equivalent to $31 a share, So unless you are a nimble trader, forget about chasing Yahoo. The big money has been made. The risks in pursuing Yahoo stock at this high level should scare anybody who isn’t a prescient, professional, swift-footed trader.

But there is a way to win from the Microsoft-Yahoo-Google triangle. First, assume that Microsoft will play a hard-knuckle brawl and won’t let Google get in its way. Assume, as well, that ultimately Microsoft will have its way with Yahoo, perhaps paying a few billion more for the embrace. Things Could Get Ugly

Yahoo will, of course, attempt to delay any deal as part of a strategy to persuade Microsoft to up the ante. Microsoft might just do that, up to a point. But since it doesn’t look like there are eager white knights waiting in the wings—because the deal is mighty expensive as it is—Microsoft may not be inclined to be too generous with its offer. And who, aside from Google, has the resources and capability to pursue Yahoo at this high price and expect to benefit from the chase?

Yahoo may want to outsource part or all of its search-engine business to Google and others. That, of course, would be anathema to Microsoft, which could drop the entire offer. In that case, Yahoo’s stock would crash and leave its shareholders in limbo. At best, Microsoft will fight like an enraged rejected suitor to get what it wants. That could get ugly. And Yahoo would see its chances vanish of providing shareholders with the value they deserve. Nobody can guarantee, or even imagine, that Yahoo’s stock price will get to the level it is today without a deal like the one that Microsoft is offering. Yahoo shareholders have been waiting patiently for a turnaround. The Internet bubble burst in 2000, and the tech bulls have left Yahoo’s playroom.

So what should investors do? You can’t go wrong at this point if you buy shares of both Microsoft, now trading at $28—off from $37 in November, 2007, and way down from its high of $59 in 2000—and Google, currently at $505, down from its high of $747 on Nov. 7, 2007. An Underappreciated Microsoft

Why buy Microsoft and Google now? Both are down from their highs and are looking very attractive as long-term holdings based on their prospects for solid growth. One big investor who has been upping his stake in Microsoft and Google is Martin Sass, chairman and CEO of «investing.businessweek.com», an investment management company that shepherds $10 billion. Sass first purchased Microsoft shares in May, 2007, at $28 a share, and Google when the stock was at $365. Sass considers Microsoft a “value” play and Google a “growth” stock.