GE: A Simpler, More Valuable Digital Industrial Company

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Today, Trian Partners announced a $2.5 billion investment in GE. Read Jeff Immelt’s statement on the investment.

The investment underscores GE’s focus on improving margins and returns, reducing costs and the size of corporate, returning capital to shareholders and realigning its portfolio.

Here’s a snapshot of GE’s strategy, portfolio actions, and how the company is performing.

 Strategy – The GE Store

In reflecting on the scale and diversity of GE, Jeff Immelt wrote in his latest letter to shareowners: “We drive enterprise advantages that benefit the entire company, through what we call the ‘GE Store.’ It means that every business in GE can share and access the same technology, markets, structure and intellect. The value of the GE Store is captured by faster growth at higher margins; it makes the totality of GE more competitive than the parts. No other company has the ability to transfer intellect and technology as GE can through the Store.”

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The GE Store is a key competitive advantage for GE. The company invests to build common capabilities in technology and services, to leverage its scale across businesses and regions, and to share intellect and culture.

 Portfolio actions creating a more valuable industrial company

On April 10 of this year, GE reaffirmed its focus on its industrial businesses, announcing a plan to sell off most of its GE Capital assets to achieve 90 percent of its earnings from high-return, industrial businesses technology by 2018.Image may be NSFW.
Clik here to view. The move marked the continuation of GE’s strategy to transform its portfolio and return to its industrial roots. The company also announced a revised capital allocation strategy – one that will return more than $90 billion to investors by the end on 2018.

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The plan is being executed quickly, with approximately $95 billion in deals announced since April 10, nearly halfway to the asset sale goal less than six months after announcing the plan.

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GE also expects to complete the split-off of Synchrony Financial this year, a share exchange valued at approximately $20 billion. The move will help reduce GE’s share count and is a large part of GE’s exit from financial services.

In addition to the GE Capital exit plan and Synchrony split, GE has received regulatory approval for its largest-ever industrial acquisition, of Alstom’s power and grid businesses. Alstom will increase GE’s installed base of turbines by 50 percent, adds complementary technologies, and significantly grows GE’s global footprint.

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GE also expects to close on the sale of its Appliances business, for $3.3 billion, by the end of the year. Here’s a list of other transactions’ GE has made as part of its portfolio transformation.

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Performance – First Half of 2015

In July, GE reported strong second quarter earnings, increasing margins 100 bps, driving organic revenue growth of 5 percent and raised its guidance for 2015 industrial operating earnings per share. The results keep GE on track towards its investor goals.

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The Future of GE – The World’s Digital Industrial Company

This week at GE’s annual Minds + Machines event, Jeff Immelt projected that revenue from GE’s software services would nearly triple, to $15 billion, by 2020. As software continues to ‘eat the world’ GE is positioned at the nexus of the industrial domain expertise and industrial software capability. This unique position will provide exceptional outcomes for the next generation of customers.

Here’s a link to Jeff’s keynote at Minds + Machines 2015.