Tuesday, June 13, 2017

The departure of Immelt from GE was overdue

The industrial conglomerate GE is a sprawling behemoth of valuable and productive businesses.  The financial asset GE is a stock that has been a laggard for years.  Jeffrey Immelt inherited a tough situation from the highly regarded, hard charging egomaniac Jack Welch.  He became a custodian of the company more than a disruptive or energizing leader.  His major action was to remove GE from the financial services business but he did so in a way that reduced risk substantially while not creating any significant value in the disposition of those businesses.

Immelt clearly enjoyed his 16 years as CEO.  He became a major public figure and a sought after spokesperson for industry.  He devoted considerable time to public service and to charitable organizations.  Now GE is in need of a major overhaul from the perspective of many shareholders who have stayed the course due to GE's strong balance sheet and healthy dividend.

The new CEO will be John Flannery, a 30 year veteran of the company who has wide business line and international experience.  Is it possible that a hopeful comparison can be made to the succession of Satya Nadelli to CEO of Microsoft three years ago after Steve Ballmer's languid tenure.  Microsoft stock is up 60% since Ballmer's overdue departure.  That is the hope of investors who pushed GE's stock up 3.4% yesterday after the announcement, but backed off more than half of that gain today as Flannery's pure GE persona was focused on.  Can he shake up this conglomerate in a way that creates investor enthusiasm and reinvigorates businesses?  Is GE's capital might required for all of its huge businesses, or can some be broken out into still large stand alone companies that are more competitively focused?

That's the question.  A few shares were added here early yesterday to an already full position as a reflection of some optimism.  This change could be extremely positive.  We will see.  

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