A Lightbulb Moment For GE

GE stock has lost more than 40% of its value since 2000, when Flannery’s predecessor, Jeffrey Immelt, was appointed.

GE is one of the US’s most iconic conglomerates, operating across various industries in 180 countries. But after 125 years of expansion, the company, which originally incorporated as Edison General Electric, is contemplating a change of direction. Bowing to years of pressure from its large shareholder base and seeking a new identity because the old model is not profitable anymore, the company plans to restrict its range of activities, rather than expand them.

CEO and chairman John Flannery, who was appointed in August, plans to sell $20 billion worth of assets, including historic aspects of the business such as its lightbulb division. “The GE of the future is going to be a more focused industrial company,” Flannery told shareholders in a speech in November, after his first 100 days in office. With a career built at GE, Flannery led the turnaround at GE Healthcare.

The decision to halve the dividend—the second time this has happened in GE’s long history—to 48 cents will bring more than $4 billion of savings to the group, but could rile shareholders.

GE stock has lost more than 40% of its value since 2000, when Flannery’s predecessor, Jeffrey Immelt, was appointed. Whether the new, streamlined GE can morph into a money-making machine remains to be seen.

Commentators are focused on the fact that the company may have to cut dividends even further, slash staff and sell businesses at a faster pace. Undoubtedly, the new GE will be a completely different company in future. “This is all really in the context of making us simpler and easier to operate,” Flannery told shareholders on a day that saw the company lose more than 6% of its market value. “Complexity hurts us. Complexity has hurt us,” he said.