Fri Jan 18, 2013 7:07pm EST

n">(Reuters) - What's Jeff Immelt going to do with the money?

General Electric Co shareholders are wondering what the company's chief executive plans to do with a cash windfall that could total tens of billions of dollars over several years as the company sells its remaining stake in NBC Universal and recoups more of the profits earned by finance unit GE Capital.

Last year GE Capital sent $6.4 billion back to the company's headquarters in Fairfield, Connecticut. Analysts estimate that the unit could generate a similar amount of cash this year.

But GE could get an even bigger infusion in mid-2014, when it is set to cash in on its option of selling the rest of its stake in NBC Universal to Comcast Corp. The stake is currently valued at roughly $17 billion, but the final price and timing of the deal could vary.

Immelt spoke with investors on Friday in a conference call after GE posted earnings that rose 7.5 percent from a year earlier, beating expectations.

During the call, the CEO of the largest U.S. conglomerate was cagey about his spending plans. He did not venture far beyond his often-repeated mantra that GE's priorities were balanced between raising its dividend, buying back shares and doing some small takeovers.

"This company is going to have a ton of cash over the next three years, right?" Immelt said. "I don't really want to make any other pronouncements other than disciplined and balanced capital allocation. We'll go over the other bridges as we get there but let's start with that."

GE shares were up 3 percent on a day that major U.S. stock indexes barely budged.

In January 2011, GE sold a majority stake in NBC to Comcast back. About that time, GE embarked on a $12 billion wave of acquisitions of smaller makers of energy equipment. That is a pattern that could repeat itself, suggested Jeff Sprague, analyst with Vertical Research Partners.

"They do need to redeploy that cash in a way that, at a minimum, preserves and ideally enhances the earnings profile," Sprague said. The company might consider deals to build up its newly created $7.4 billion Energy Management division, which makes equipment used to transmit electricity.

The company would do well to stick with Immelt's stated goal of aiming for targets worth about $1 billion to $3 billion, Sprague added.

"If they can keep it in that smaller range, smaller for them at least, you just lower risk," he said. "It's more digestible."

DECEMBER DIVIDEND

Immelt's plans for the money also include continuing to raise its dividend and buy back shares.

Investors suggested that Friday's better-than-expected fourth-quarter earnings report could prompt the company to again boost its dividend, which it raised by 12 percent in December.

"Are they going to be in a position in the second quarter, perhaps if they perform so strongly again, to raise their dividend?" asked Oliver Pursche, president of Gary Goldberg Financial Services in Suffern, New York.

Chief Financial Officer Keith Sherin said the company did not plan to boost its payout quite so often.

"Our historical pattern was to do dividend increases at the end of the year by reviewing capital allocation plans with the board of directors and I would think that would continue to be our practice," he said in an interview.

The company's four increases from July 2010 through December 2011 were a special case, intended to make up for a sharp cut to the payout during the financial crisis.

Peter Sorrentino, senior vice president and portfolio manager at Huntington Asset Advisors in Cincinnati, suggested that GE should not try to reinvest all the money it gets when it sells the remainder of NBC to Comcast. Instead, he said the company should consider paying more out in dividends and buybacks.

"Let's benefit shareholders who've stayed the course over a long period of time," Sorrentino said. "Better to be lean and focused. Target new growth markets, but let's not continue to carry the size of the enterprise just because that's what we've always done."

The long languor of GE's shares stands as one of shareholders' main complaints about Immelt's tenure. While GE's 12 percent rise over the past year outpaced the 9 percent rise of the Dow Jones industrial average, it trades well below the $42 mark reached in 2007 before the financial crisis. The broader U.S. stock market also remains below its pre-crisis highs.

RECORD BACKLOG

GE, the world's biggest maker of jet engines and electric turbines, reported that its order backlog -- a closely watched indicator of future sales -- hit a record high $210 billion in the fourth quarter, up from $203 billion in the third quarter.

"The backlog was a really good number. I didn't expect to see a $7 billion, 3.5 percent rise in the backlog," said Jack De Gan, chief investment officer at Harbor Advisory Corp, which holds GE shares. "Orders in the fourth quarter must have been really good for the industrial side."

Orders were up 2 percent, and would have been up 7 percent factoring out a sharp drop in demand for wind turbines related to the expected expiration of a tax credit, as well as exchange-rate fluctuations.

GE shares were up 3 percent to $21.94 in early Friday afternoon trading on the New York Stock Exchange. The Dow Jones industrial average and the S&P 500 were up slightly.

Fourth-quarter earnings rose to $4.01 billion, or 38 cents per share, from $3.73 billion, or 35 cents per share, a year earlier.

Factoring out one-time items, profit came to 44 cents per share, a penny ahead of analysts' estimates, according to Thomson Reuters I/B/E/S.

Revenue rose 3.6 percent to $39.33 billion from $37.97 billion a year earlier.

Solid demand in China and oil-producing countries helped GE to offset unsteady economies at home and in Europe, Immelt said.

"We saw real strength in the emerging markets and the developed regions stabilized," Immelt told investors.

GE kicks off a wave of earnings reports from the nation's largest manufacturers, with United Technologies Corp, 3M Co and Honeywell International Inc all due next week.

(Reporting by Scott Malone; Additional reporting by Ernest Scheyder in New York; Editing by Jeffrey Benkoe, Tim Dobbyn and David Gregorio)

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Fri Jan 18, 2013 4:06pm EST

n">(Reuters) - Morgan Stanley Chief Executive James Gorman said the bank has turned itself around and can meet its goals for profitability, his boldest pronouncement yet about the near-term potential for a company that has long lagged its peers.

The investment bank and wealth manager on Friday posted fourth-quarter earnings that beat analysts' average estimate by a wide margin, helped by a big jump in trading revenue and stronger performance in its wealth management group.

Morgan Stanley's fixed-income trading business performed worse than its rivals, and its overall return on equity, a measure of how efficiently the bank wrings profit from shareholder money, was less than half that of Goldman Sachs Group Inc. But Gorman told investors the bank was "working aggressively" to improve its return on equity.

In current market conditions, the bank's return on equity can reach 10 percent, Gorman said on a conference call. Analysts said the figure is the bare minimum that many investors demand, but it is far above Morgan Stanley's recent performance, and Gorman's statement marks the first time Morgan Stanley has said it can meet that goal even if business doesn't pick up.

"After a year of significant challenges, Morgan Stanley has reached a pivot point," Gorman said in a statement. "Our firm is now poised to reach the returns of which it is capable on behalf of our shareholders."

Morgan Stanley's stock climbed as much as 8.2 percent on Friday, to $22.46, the highest price since August 2011 and marking the biggest intraday jump since June, before closing at $22.38.

"I think Morgan Stanley has turned the corner," said Joe Terril, president of St. Louis-based money manager Terril & Co, which invests in bank stocks. "I believe they'll gradually improve quarter after quarter -- it's not a one-time event."

Morgan Stanley said its wealth management division delivered a 17 percent pretax profit margin in the quarter, exceeding an internal target months ahead of schedule.

The wealth management division is closely watched by investors because Gorman is staking the future of the bank on it, arguing that more stable returns there will help offset volatility from trading and investment banking.

Morgan Stanley is one of several Wall Street banks using layoffs and compensation cuts to help boost its bottom line. The firm paid out 44 percent of adjusted revenue to employees in its securities and investment banking business last year, down from 53 percent in 2011, Chief Financial Officer Ruth Porat said in an interview.

Across the entire company, compensation costs fell by $711 million, or 4 percent, in 2012 as Morgan Stanley cut nearly 5,000 employees from its payroll.

One senior employee might decide to leave. The Obama administration is considering Porat for a position as Treasury deputy secretary, a source familiar with the matter told Reuters, which could leave Morgan Stanley shuffling the decks in top management. Porat would not comment.

Overall, the bank reported fourth-quarter income from continuing operations of $573 million, or 28 cents per share, compared with a loss of $222 million, or 13 cents per share, in the year-ago period, when it took a big one-time charge.

Excluding a charge related to changes in the value of Morgan Stanley's debt, the bank earned $894 million, or 45 cents per share. On that basis, analysts' average forecast was 27 cents per share, according to Thomson Reuters I/B/E/S.

In sales and trading, adjusted revenue more than doubled from a year earlier, to $2 billion from $867 million. Fixed-income, currency and commodities trading revenue was $811 million, adjusted for accounting charges, compared with a loss of $493 million a year earlier.

Glenn Schorr, an analyst at Nomura, said Morgan Stanley's fixed-income currency and commodities trading business posted an increase of 26 percent in adjusted revenue, while peers reported an average gain of 43 percent.

The division suffered because of historically weak revenue in commodities trading, which faced unexpected price movements related to weather and lower prices in its storage business. The unit reported its worst results since 1995, Gorman said on CNBC.

Curbs on banks trading with their own money and the impact of fracking lowering prices for certain commodities have eaten into banks' profits in commodities, a once-lucrative trading business for Wall Street.

Merger advisory revenue rose 12 percent to $454 million, while stock and bond underwriting revenue rose 62 percent to $771 million.

Morgan Stanley is the last big U.S. bank to report earnings this week. Rival Goldman Sachs on Wednesday said it cut compensation costs 11 percent in the fourth quarter, helping boost returns to shareholders.

(Additional reporting by Anil D'Silva in Bangalore and Rachelle Younglai in Washington; Editing by Supriya Kurane, John Wallace and Leslie Adler)

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* Rambus says relevant documents were all produced

* Appeals judge says Rambus doesn't know what was shredded

* Other judge: ITC may use wrong standard to take cases

WASHINGTON, Oct 6 (Reuters) - Chip technology company Rambus Inc (RMBS.O) was quizzed in court about destroyed documents and its own use of its patents as graphics chip maker Nvidia Corp (NVDA.O) sought relief from expensive licensing fees.

The two sides squared off on Thursday before the U.S. Court of Appeals for the Federal Circuit over whether Nvidia infringed Rambus patents for controlling and managing the flow of computer data to and from a chip's memory.

The U.S. International Trade Commission, which hears patent cases involving imports, had previously found Nvidia infringed Rambus chip patents and issued an order barring the importation of any chip made with the infringing technology.

Nvidia licensed the Rambus technology at royalty rates of between 1 percent and 2 percent depending on the type of memory controller involved, to allow its chips to enter the country, but the legal battle has continued.

The ITC had found that Nvidia infringed three patents but did not infringe two others. Both sides appealed to the circuit court and the arguments were consolidated.

Part of the battle has centered on whether Rambus destroyed documents to avoid having them used against it in litigation.

Rambus has acknowledged document destruction but said it was part of ordinary business practices.

Judge Kathleen O'Malley, part of a three-judge panel that heard the case, took issue with an attorney for Rambus who said the company produced the documents that were requested and that all relevant documents were preserved.

"You admit you have no idea what was destroyed! You have no record of what was destroyed!" she said.

"Remember, you saved the ones that helped you and destroyed the ones that hurt you," O'Malley said at another point.

The appeals court previously ruled in cases between Rambus and Micron Technology (MU.O) and Hynix Semiconductor (000660.KS) that Rambus destroyed documents inappropriately. The cases have been remanded back to lower courts for further consideration.

The battle is a key one for Nvidia, whose core business relies on the sale of specialized graphics cards.

Judge Raymond Clevenger on Thursday repeatedly asked whether Rambus had proved that it used the patents that it was seeking to defend.

Companies may not sue at the International Trade Commission unless they show that they are using the patent domestically. Rambus licensed the patents, and used that to proceed with the lawsuit.

Clevenger said district courts cannot order production or importation of infringing products to cease since the Supreme Court said in a 2006 decision that an injunction should not necessarily follow a finding of infringement. "It's a factor we should think about," he said.

Rambus and others go to the ITC to file patent complaints because the trade commission, unlike U.S. district courts, can bar the importation of devices made with infringing technology.

The case against Nvidia and others that was before the International Trade Commission is number 337-661. The U.S. Court of Appeals for the Federal Circuit case numbers are 2010-1483 and 2010-1556. (Reporting by Diane Bartz; Editing by Tim Dobbyn)

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