It's time to make some major changes, something I have said before. I am not the first to suggest this and I am quite sure I will not be the last. General Electric (NYSE: GE) needs to take some serious action to add shareholder value. Apparently, Jeffrey Immelt was very embarrassed after last quarter's earnings announcement, when the company reported disappointing earnings following Immelts' own earlier statement that they would hit their targets.
After GE sells its kitchen and laundry appliances, which is on the block now, it will still own business-producing aircraft engines, locomotives, electric distribution and control equipment, generators and turbines, and medical-imaging equipment. GE is also one of the preeminent financial services companies in the U.S. Commercial finance, consumer finance, and equipment financing and leasing together comprise the company's largest segment. Here is the formal list from the company web site:
Lately, I've been hearing a lot of chatter about General Electric (NYSE: GE) and its NBC Universal asset (here's one example). Specifically, there's been talk about the future of the movie and television business and its role as a productive member of the GE portfolio. There are a lot of pundits out there who would like to see it sold off; probably a lot of investors would like that, too. Thankfully, CEO Jeffrey Immelt isn't one of them; he has consistently and steadfastly denied that NBC Universal will be offered to buyers in the near future. I hope he retains such opinion, because I definitely think GE needs NBC Universal.
Sure, GE needs to sell things from time to time, the latest example being the conglomerate's desire to dump its appliance division (Peter Cohan agreed with this logic and recently wrote a piece about the subject). But it shouldn't get rid of NBC Universal. Ever. Well, maybe there might be some compelling event in the future that would justify a sale, but I really don't see that happening. Why? Because content is valuable, and GE needs to own a piece of it.
We live in exciting times. The media is changing. New distribution paradigms, driven by digital technologies, are forming all the time. Libraries of films and television shows are going to be valuable well into the future. Think about Universal and its film library. The Mummy, Jurassic Park, E.T., The Bourne Ultimatum, Jaws...you get the picture. NBC Universal will be able to monetize all these franchises and many, many more from the library, as well as ones that have yet to be produced, via the new digital economy.
USA Today reports that oil billionaire T. Boone Pickens is placing a $2 billion bet on wind power. Pickens' Mesa Power plans to build the Pampa Wind Project in the Texas Panhandle. It will eventually cover 400,000 acres and generate enough power for more than 1.3 million homes -- making it the largest wind farm in the world.
And Pickens is helping General Electric Company (NYSE: GE) in the bargain. That's because he's buying GE turbine technology. GE is expected to deliver 667, 1.5-megawatt wind turbines in 2010 and 2011. Jeffrey Immelt, GE Chairman and CEO said, "As America's demand for energy escalates, it is clear that wind can and will play a bigger part in meeting that need. We're excited to partner with an energy visionary like T. Boone Pickens to bring our wind technology to the marketplace."
With oil hitting $127 a barrel, I hope this project is the first of many. It will take many different sources of alternative energy to reduce U.S. demand for black gold. Wind power is certainly a good alternative. And if Pickens and GE get richer in the process, that's fine by me.
AP reports that General Electric Company (NYSE: GE) CEO Jeff Immelt did quite a bit of whining at today's shareholder meeting in Erie, PA. But he did announce one piece of news that might help GE's stock: GE will increase its planned cost cutting from $2 billion to $3 billion. Yet I think he's still smarting from Jack Welch's threat to shoot Immelt on GE's CNBC last week.
Immelt whined on two fronts: the tough economy and how his buying and selling of GE business units is not appreciated. Here's what he said about the economy: "We are in the toughest economy since 2001 and the worst housing crisis since the Depression. Banks have written off more than $250 billion. . . . Days of easy credit have turned into months of no credit at all. While I am confident about the economy long term, we could see even more difficult times ahead."
And on the matter of GE's portfolio, Immelt exuded self-pity as he assailed his audience: "I would ask people to keep something in mind. In the last five or six years I've sold 50 or $60 billion of business. I've acquired 70 or $80 billion of business. This has probably been the most active portfolio change in the history of the company and it would be hard to find another industrial company that's done anything close to what we've done."
"There are more reviews and intensity, but no real change to the strategy,'' Immelt said told Bloomberg News. ``The strategy remains intact.''
Really? Shares of the Fairfield, Conn.-based company have slumped about 13% this year. The stock had its biggest fall in 20 years after reporting disappointing results. Immelt, though, either is oblivious or cool under fire. I am not sure which.
General Electric's (NYSE: GE) CEO Jeffrey Immelt is facing increasing scrutiny after last week's unpleasant earnings surprise sent the stock down 13%. GE is now trading near its 52-week low of $31.55, and major investors are not pleased.
James Hardesty of Hardesty Capital Management, which owns shares in GE, was quoted on Bloomberg TV as saying, "Immelt now has to be put in the penalty box."
Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati, which owns more than six million GE shares, argues that analysts and the GE board need to look at Immelt's plans very carefully."The time has come for greater scrutiny of Immelt," said Sorrentino on Bloomberg Radio. "It's really incumbent on the board to ask tougher questions now. The board needs to ask, 'Are we really headed in the right direction? Yes, the Infrastructure business is going very well; let's make sure that we're not blowing it on the other side'."
For his part, Immelt says he hates missing his numbers, and that he expects GE's strategy to pay off in the long run. The problem is that Immelt was claiming that all was well as recently as March. Immelt had forecast 10% growth in earnings, a forecast that has now been cut in half. Understandably, this makes investors nervous. If Immelt was that far off, is he really in control of the company? And what other surprises might erupt? Until we know the answers to those questions, Immelt can expect to face greater scrutiny and a rising tide of investor dissatisfaction.
CNNMoney reports that General Electric Company (NYSE: GE) missed earnings expectations by a mile. Its net income fell 12% to $4.4 billion, or 44 cents per share, seven cents less than what Thomson Financial's polling of analysts had estimated.
In February I analyzed GE's breakup value and concluded that the stock was probably a bit overvalued. The big problem with today's earnings announcement was GE's financial services unit. Like Wall Street banks, GE suffered from "extraordinary disruption in the capital markets in March [which] affected our ability to complete asset sales and resulted in higher mark-to-market losses and impairments."
But that's not all. GE missed on revenues and lowered its guidance. Sales rose 8% to $42.2 billion, $1.5 billion below analysts' forecast of $43.7 billion. GE lowered its full year guidance to between $2.20 and $2.30 per share, reflecting flat to 5% growth. GE is down 11% in pre-market.
Since its current CEO, Jeff Immelt took over in September 2001, GE stock has fallen 20% from $41 to $33. Remind me again of why the "great" Jack Welch chose Immelt to succeed him.
The New York Times reports that General Electric Co. (NYSE: GE) sponsored a webcast yesterday with its CEO, Jeff Immelt, to answer questions submitted by the general public. Immelt denied that its NBC Universal unit was for sale while answering questions from Carl Quintanilla and a co-host of the Squawk Box program on CNBC, and Chrystia Freedland, the United States managing editor of The Financial Times.
A few disclosures are in order: GE invited me to participate in this webcast but I had a prior commitment. I met last July with GE's CFO -- where he said that NBC Universal was worth between $40 billion and $45 billion. I've appeared on CNBC with Quintanilla, most recently as guest host of Squawk Box. And I own GE stock and am not a happy camper since it's trading 13% below where it was on September 10, 2001 when Immelt took over. The S&P 500 has risen 21% since then.
Is Immelt right that GE is undervalued? I took a look at that question and concluded that it was slightly overvalued on February 27th. Specifically, I calculated a range of breakup values for GE which were between 11.1% and 1.5% less below GE's current market capitalization. I could be wrong about that analysis since I was compounding assumptions on assumptions and had no guidance on the analysis from GE.
Several media outlets have reported that GE's (NYSE: GE) CEO Jeff Immelt used a webcast to try to reach the company's two million smaller shareholders. The project included Immelt being questioned by Carl Quintanilla of CNBC, and Chrystia Freedland of The Financial Times.
The webcast drew 6,000 questions over the internet, but Immelt could only answer a tiny fraction of those. According toThe New York Times, Mr. Immelt had one message: "We ought to be trading at a premium to the S.& P."
GE is missing the boat. Whether it is through webcasts or meetings with large investors, Wall Street does not believe in the conglomerate's strategy. At this point, the growth at GE comes from its infrastructure and financial operations. Divisions like NBC Universal, the company's medical group, and its industrial operations are a drag on the company's overall results.
GE trades near a 52-week low. PR won't solve that problem. The company needs to restructure and dump the dogs.
Douglas A. McIntyre is an editor at 247wallst.com.
In GE's (NYSE: GE) annual report, CEO Jeff Immelt plans to state, once again, that the conglomerate will not sell NBC Universal, the company's entertainment arm. There have been rumors of a sale for the last two years.
"Should we sell NBCU? The answer is no!" Mr. Immelt writes in a message for investors in G.E.'s 2007 annual report, according toThe New York Times.
The statement is likely to disappoint GE investors. According to the company's 10-K, NBC Universal revenue dropped last year to $15.4 billion from $16.2 billion the year before. Operating profit moved up about 7% to $3.1 billion. These results trailed the performance of GE's large infrastructure and finance businesses.
GE now trades near its 52-week low. With its balance sheet and international prospects, the stock should be doing much better. But the company has to auction off its under-performers if the shares are going to gain ground.
Douglas A. McIntyre is an editor at 247wallst.com.
General Electric (NYSE: GE) CEO Jeffrey Immelt will host GE's annual performance review and business outlook meeting on December 11. GE overall option implied volatility of 26 is above its 26-week average of 24 according to Track Data, suggesting larger risk.
Boeing (NYSE: BA) will give a mid-quarter update on the 787 Dreamliner program on December 11th. Jeffries says, "We feel comfortable with our $122 price target." BA overall option implied volatility of 28 is near its 26-week average of 27 according to Track Data, suggesting non-directional risk.
Daily Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
General Electric Co. (NYSE: GE) today gave a bullish outlook for 2007 helped by growth in energy, healthcare and infrastructure.
Revenue will be $175 billion this year, with a profit of $23 billion, according to a Dow Jones report. That's better than the $171.6 billion average consensus estimate expected by analysts surveyed by Thomson Financial. Chief Executive Jeffrey Immelt crowed on his company's CNBC network that "global growth is really substantial now." Like other CEOs, Immelt sees the housing market as "tough," which may hurt some GE businesses such as appliances.
Immelt dismissed talk on Wall Street calling for the conglomerate to dump its NBC Universal media and entertainment business, pointing to its improving performance. "I am all about running NBC Universal for the long-term," he said.
NBC Universal Chief Executive Jeff Zucker made it clear at a conference yesterday that GE (NYSE: GE) had no interest in selling the media business. Referring to GE CEO Jeff Immelt, Zucker said, "He has said numerous times that NBCU is not for sale. It is not for sale after the Olympics." Some press reports have indicated that GE would take the big money from the sports event and then dump the business on some sucker.
It is odd that the head of a GE division should have to make this kind of comment at all. The head of the locomotive division probably wouldn't make comments about the future of his business. Meanwhile, NBC Universal can go on operating as usual whether Wall Street thinks it is for sale or not.
The argument for selling NBC is that the unit does not fit with the conglomerate's industrial and financial operations. That is true, but owning a network does mean tickets to the Super Bowl and the Oscars.
NBC is a $15 billion business with operating income running about $2.5 billion, making it a modest part of GE's overall earnings. Still, the business is about the size of CBS (NYSE: CBS), which has a market cap of $21 billion and debt of $7 billion.
For the $28 billion enterprise value of CBS, GE would sell NBC tomorrow.
Douglas A. McIntyre is an editor of 247wallst.com.
The plan makes sense, at least on paper. GE (NYSE: GE) believes that it can offset any slowdown in its US business by the acceleration of revenue in China and India. It is, perhaps, one of the benefits of being a multinational.
The FTwrites that, "GE's chairman and chief executive (Jeffrey Immelt) said the company's sales in emerging markets such as China and India were expanding at 20 percent a year, and there were few signs of this growth slowing."
But, GE's view is based on two assumptions that may not be true. The first is that a slowdown in the US will not spread to Asia and the Indian subcontinent. Much of the export income from China and India depends on demand in the US and Europe. if that demand slackens, there is no guarantee that their own economies will be able to continue growing rapidly.
GE is also assuming that growth in these countries, particularly China, will not come without a cost. Trade tensions between the US and the world's most populous country still exist. The China toy debacle demonstrates that. It would not take so terribly much for China to shut its markets to certain US goods and services, if it feels that it has been provoked.
GE's plan to keep growing outside the US looks good, for now.
Douglas A. McIntyre is an editor at 247wall st.com.
General Electric Company's (NYSE: GE) Industrial segment is worth between $20.2 billion and $21.7 billion, according to my estimates.
GE Industrial, which constituted 20.5%, 22.1% and 22.9% of GE's revenues in 2006, 2005 and 2004, respectively produces and sells products including consumer appliances, industrial equipment and plastics, and related services. It also provides asset management services for the transportation industry.
GE Industrial strikes me as a hodgepodge of businesses that should either be fixed or sold. In the second quarter, this segment's revenues declined while its profits increased slightly. I was intrigued that Keith Sherin said that its appliances unit generated a return on total capital of 70%. On the other hand I wonder about how many of the other units within this segment earn such high returns.
Assuming that GE Industrial generates net income of $1.3 billion in 2007, here are the range of valuations based on the Price/Earnings ratios of the following peer companies:
It's time to make some major changes, something I have said before. I am not the first to suggest this and I am quite sure I will not be the last. General Electric (NYSE: GE) needs to take some serious action to add shareholder value. Apparently, Jeffrey Immelt was very embarrassed after last quarter's earnings announcement, when the company reported disappointing earnings following Immelts' own earlier statement that they would hit their targets.
After posting a 
The 
In 
General Electric
NBC Universal Chief Executive Jeff Zucker 
Big Losers: 15 large stocks that have plummeted
What is going on with the markets? What should you do about it?
Closing Bell: The meltdown that almost was . . . NCC, HIG, SAP, DNDN
