General Electric Co. CEO Jeff Immelt,
right, waits for the start of the company's
annual shareholders meeting.

Investors Wary as GE Pulls Plug on Appliance Division

May 16, 2008 10:58 AM
by Anne Szustek
General Electric, the company founded by Thomas Edison that created the refrigerator and toaster oven, will spin off or sell its century-old appliance unit.

30-Second Summary

Rumors of the sell-off may have scared investors, who dumped GE stock in the largest numbers seen in more than 20 years.

GE’s appliance unit makes up just a fraction of the company’s total revenue—accounting for $7.2 billion last year of its annual average of $172 billion. But it is the second-largest American appliance manufacturer after Whirlpool in terms of sales.

“A sale would come as the company faces pressure to trim a portfolio that ranges from credit cards to aircraft engines to television broadcasting,” The Wall Street Journal reports.

Condé Nast Portfolio’s Jeffrey Cane argues that GE’s diversification may be the reason behind the company’s sluggish numbers, given former CEO Jack Welch’s drive to develop its financial businesses—“a model that [CEO Jeff] Immelt needs to break” and concentrate on its industrial divisions.

However, a sell-off of the appliance unit may not be enough to assuage investors. Soon after GE reported its first-quarter results last month, Nicholas Heymann, the director of global infrastructure at Sterne Agee, said on CNBC, “We’re really not going to see investors re-embrace this stock until we can look at a portfolio where the mix of businesses will allow sustainable above-average performance.”

Investment bank Goldman Sachs was hired to run an auction for GE’s appliance division, which may attract foreign investors such as Germany’s Bosch and China’s Haier looking to make inroads into the U.S. market, says the Journal.

Jeff Macke, cohost of financial news program “Fast Money,” leans toward Haier as a possible buyer, predicting that Asia will be the destination for GE appliances.

Headline Link: ‘GE May Shed Storied Appliance Unit’

Video: ‘GE's Profit Miss Shakes Confidence in Company’

Opinion & Analysis: Not the right time; slow performance inherited from past leadership

Reference: GE’s business activities

Related Topics: GE Goes into Green Energy; background on Thomas Edison


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