GE's Immelt touts value of conglomerate's scale to investors

Mon Mar 16, 2015 2:09pm EDT
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By Lewis Krauskopf

(Reuters) - General Electric Co (GE.N: Quote) Chief Executive Officer Jeff Immelt is sticking by his company's model for housing diverse businesses under one roof at a time when other U.S. conglomerates are looking at hiving off units to please investors.

In a wide-ranging annual letter to shareholders released on Monday, Immelt details advantages from such scale through shared technology and other areas through what he calls the "GE Store."

"The value of the GE Store is captured by faster growth at higher margins; it makes the totality of GE more competitive than the parts," Immelt writes.

As an example, Immelt cites how GE can use aircraft engine alternators to improve motors for pumping oil. He points to additive manufacturing, also known as 3-D printing, as a new technology for potential use across GE's businesses, which include power turbines, locomotives and MRI machines.

Immelt's comments follow GE's meeting last week to showcase its technology to investors, in what some analysts also viewed as providing rationale for a conglomerate model.

They also come after rival U.S. conglomerate United Technologies Corp (UTX.N: Quote) last week announced it would weigh a spinoff of its Sikorsky helicopter unit after a portfolio review. Other industrial companies, such as Tyco International Plc TYC.N and ITT Corp (ITT.N: Quote), have undergone more significant breakups in recent years.

To be sure, Immelt has gotten GE out of businesses such as plastics, and last year decided to sell its appliances unit as it reshapes its industrial focus. It is also scaling back its finance division.

Barclays analyst Scott Davis has in the past raised the prospect that investors want GE to go further, including shedding its medical business.   Continued...

The General Electric logo is seen in a Sears store in Schaumburg, Illinois, September 8, 2014. REUTERS/Jim Young