Withdrawals hit Affiliated Managers

Despite lower profit in the third quarter, Genzume said revenue rose 21 percent to $1.16 billion. The it was, however, less than the $1.18 billion analysts expected. (Pat Greenhouse/Globe Staff/File 2006)

Affiliated Managers Group Inc.'s third-quarter profit fell 42 percent as stock market losses and client withdrawals undercut assets at the 28 investment firms it owns stakes in.

Net income declined to $24.8 million, or 69 cents a share, from $42.6 million, or $1.07, a year earlier, Beverly-based Affiliated Managers said. Cash earnings, which exclude some expenses, fell 16 percent to $1.31 a share, topping the average estimate of $1.24 by 10 analysts surveyed by Bloomberg.

Assets overseen by the company's affiliates declined 14 percent to $207.3 billion in the quarter. Investment losses accounted for $27.9 billion of the drop and clients withdrew $5.9 billion. Affiliated Managers, which holds stakes in firms including Third Avenue Management, Tweedy Browne Co., and AQR Capital Management, said fourth-quarter cash earnings will be lower than analysts' prior estimates.

Chief financial officer Darrell Crate said cash earnings in the three months ending Dec. 31 will be $1.05 to $1.75 a share, compared with analysts' average forecast of $1.83. The company also postponed forecasting 2009 earnings.

Third-quarter revenue fell 16 percent to $290.8 million. Operating costs fell 14 percent to $218 million. (Bloomberg)

EMC Corp., the world's largest storage computer maker, posted a third-quarter profit that beat analysts' estimates on rising sales outside the United States and forecast earnings that also exceeded projections.

Profit was 25 cents a share, excluding costs such as stock-based compensation. Analysts on average projected 20 cents, according to a Bloomberg survey. Sales gained 13 percent to $3.72 billion, Hopkinton-based EMC said.

Companies have to keep adding storage capacity even as economic growth slows, and instead curb other technology spending to reduce costs, said Brian Freed, an analyst at Morgan Keegan & Co. in Memphis. International revenue grew 19 percent, representing almost half of total sales.

Sales increases in Latin America, Europe, and Asia outpaced the 7 percent growth in the United States. Revenue at EMC's VMware Inc. unit, the largest maker of programs that let computers run multiple operating systems, increased 32 percent to $472 million.

EMC said profit this quarter excluding some costs will be 30 cents to 31 cents, beating the 25-cent average analyst estimate. Sales will probably be $4 billion, compared with the $4.16 billion analysts projected.

Third-quarter net income fell to $411.3 million, or 20 cents a share, from $492.9 million, or 23 cents, a year earlier, when EMC had a $150 million gain from the sale of a stake in VMware to Cisco Systems Inc. (Bloomberg)

Genzyme Corp., the world's largest maker of drugs for rare genetic disorders, said third-quarter profit fell 25 percent because of a licensing payment for an experimental medicine.

Net income decreased to $119.6 million, or 42 cents a share, from $159.3 million, or 58 cents, a year earlier, the Cambridge-based company said. Earnings excluding some costs beat by 4 cents the average estimate of $1 a share by 21 analysts surveyed by Bloomberg.

Revenue rose 21 percent to $1.16 billion, less than the $1.18 billion analysts expected.

Genzyme's drugs treat rare hereditary disorders caused by lack of enzymes needed for critical bodily functions. The medicines are some of the world's costliest and include Cerezyme for Gaucher disease and Aldurazyme for a condition called MPS1. Both cost about $200,000 a year. The company's fastest-growing product, Myozyme for Pompe disease, costs about $300,000 a year. (Bloomberg)

Wachovia Corp., the bank that came within hours of collapse last month, reported a $24 billion loss and said business customers drained one-quarter of their deposits as the lender sought a rescuer.

The third-quarter loss at Wachovia, which agreed this month to be bought by Wells Fargo & Co., was the most for any bank since the financial crisis began. It reflected an $18.7 billion charge, termed "unlikely" by the bank in July, for the tumbling value of acquisitions such as the $24 billion purchase of Golden West Financial Corp. as housing prices peaked.

Wachovia chief executive Robert Steel spurned an offer by Citigroup Inc., accepting a $14 billion bid by Wells Fargo that formed the largest US branch network. The loss confirmed analysts' contentions that Wachovia, based in Charlotte, N.C., overpaid for takeovers such as Golden West, the California lender at the forefront of the option-adjustable-rate mortgages that punctured profit throughout the industry.

The loss was $23.9 billion, or $11.18 a share, compared with net income of $1.6 billion, or 85 cents, in the same period a year earlier, the company said in a statement. Wachovia lost $2.23 a share excluding the impairment charge.

"Unprecedented and almost unimaginable events of the third quarter" prompted the bank to take the charge, chief financial officer David Zwiener said on a recorded call.

Among those events: "Low-cost core" deposits declined 8 percent to $370 billion in the quarter as business customers withdrew funds. The scale of withdrawals helped prompt the Federal Deposit Insurance Corp. to raise its limit on insured individual deposits to $250,000 from $100,000, said Gerard Cassidy, an analyst at RBC Capital Markets in Portland, Maine.

"There was a run on the bank," Cassidy said. "That loss in deposits was a one of the catalysts to get the FDIC to guarantee all deposits up to $250,000."

FDIC spokesman Andrew Gray said he couldn't comment on specific deals.

Commercial customers have returned since Oct. 1 because of the proposed merger and new regulations boosting deposit insurance, the bank said.

Wachovia added $3.4 billion in reserves for future loan losses, mostly from its home loan and commercial real estate businesses. The bank had $15 billion of loans for which it isn't receiving interest, almost five times the amount in the same period last year.

Profit at the division that took the charge, which includes retail, small business, and commercial customers fell 43 percent to $857 million from $1.5 billion last year. The unit was built on the purchases of Golden West, SouthTrust Corp., and other smaller lenders. (Bloomberg)

Amazon.com Inc. said its profit climbed 48 percent in the third quarter, but the company reduced its full-year sales outlook, showing that the online retailer cannot escape the weak economy. Its shares dived in after-hours trading.

Chief financial officer Tom Szkutak, speaking on a conference call with analysts, said the company experienced slower growth rates near the end of the third quarter, coinciding with the onset of recent turmoil in global financial markets.

Amazon said it now anticipates full-year revenue of $18.46 billion to $19.46 billion, below the $19.52 billion that analysts polled by Thomson Reuters were expecting. In July, Amazon had predicted 2008 sales of $19.35 billion to $20.10 billion.

Analysts were widely expecting the company to lower its guidance, but some said they were not expecting it to be lowered so much.

Lazard Capital Markets analyst Colin Sebastian said Amazon is clearly "feeling the impact of the weaker economy," but "at the same time, they continue to grow much faster than overall e-commerce." RBC Capital Markets analyst Stephen Ju still feels Amazon is "the best house on the block." Still, he noted the revenue guidance range is much wider than usual.

For the third quarter, Amazon's report offered few surprises to investors.

The company earned $118 million, or 27 cents per share - 2 cents more per share than what analysts polled by Thomson Reuters expected.

In the year-ago quarter, Amazon earned $80 million, or 19 cents per share. Amazon said profit in the most recent period included a $15 million foreign currency benefit.

Revenue rose almost 31 percent to $4.26 billion, just below analysts estimates of $4.27 billion. (AP)