analysis - Unlike many of its Dow Jones Industrial Average...

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Unlike many of its Dow Jones Industrial Average brethren, General Electric has not regained the market value it previously had prior to the financial collapse back in 2008. Back on September 1, 2007, GE stock hit $41.40 per share. It is currently trading around $21.30 or nearly 50% from its peak. Ultimately, CEO Jeffrey Immelt must bare the ultimate responsibility for this lackluster performance. Fairly or unfairly, GE Capital expanded aggressively and collapsed under his watch and he is responsible for guiding the proverbial ship through the storm. So it is with that in mind that I seek to analyze what I perceive to be GE’s current strategy and recommend a new one to improve shareholder value. What Businesses are in GE? Looking at GE we see a massive, diversified, and profitable conglomerate with a lot of very good but very unrelated businesses. NBC , airplane engines, and commercial financing carry only so many opportunities for cost reduction and economies of scale. Their businesses also include medical devices, power generation, and household appliances. Within the power generation segment they sell gas turbines, generators, Integrated Gasification Combined Cycle technology (IGCC systems convert coal and other hydrocarbons into synthetic gas), steam turbines, nuclear reactors, nuclear fuel and support services, and motors and control systems for oil and gas extraction and mining. In just that segment of the business they have an astonishing range of products. Any one of these products would serve as a large and viable business in and of itself, but GE has them all rolled up under its corporate umbrella. Analyzing GE’s Business is a Frickin’ Nightmare And therein lies the problem: Analyzing GE’s business and where its going is an absolute nightmare . I could expound on any one of those products ad nauseum, but GE’s current composition requires a simply massive amount of analysis to assess and understand the risks involved with ownership (I might add this is a criticism that can be levied on many companies in this day and age). That ripples out amongst investors whether they’re institutional or individual. Since the financial collapse, investors are far more risk averse and naturally so. Hence the rush into gold during the past two plus years. So looking at GE with all of its subsidiaries and a balance sheet that includes a very large financial component ($322 billion in receivables for GE Capital alone), its easy to see why investors have said “why bother” over the past decade. Add this to the fact that the company is exhibiting tepid revenue growth and the list of concerns to an
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This note was uploaded on 02/13/2012 for the course ECON 101 taught by Professor Teerana during the Spring '11 term at Thammasat University.

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analysis - Unlike many of its Dow Jones Industrial Average...

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