Eye­ing cuts, GE re­sets

Com­pany to slash div­i­dend, re­fo­cus on prof­itable ar­eas

Boston Herald - - NEWS - By DAN ATKIN­SON

Gen­eral Elec­tric is tak­ing dras­tic steps to “re­set” its strug­gling oper­a­tions — in­clud­ing slash­ing its div­i­dend and par­ing down its fo­cus to power, avi­a­tion and health care.

And while the com­pany’s move to Bos­ton is safe, an­a­lysts said the com­pany needs to back up its talk with per­for­mance be­fore Wall Street buys back in.

CEO John Flan­nery an- nounced the moves at an in­vestor con­fer­ence in New York City yes­ter­day — declar­ing 2018 a “re­set year” and con­firm­ing pre­dic­tions of a div­i­dend cut with a re­duc­tion from 96 cents per share to 48 cents per share an­nu­ally. Flan­nery said the com­pany’s cur­rent div­i­dend pay­ment of $8.4 bil­lion ex­ceeded cash flow.

“We un­der­stand this is an ex­tremely painful ac­tion for our share­hold­ers, our own­ers,” Flan­nery told in­vestors. “It’s not a de­ci­sion we took lightly, but with ex­treme con­sid­er­a­tion and de­lib­er­a­tion of what the al­ter­na­tives were.”

Flan­nery said the $177 bil­lion com­pany is look­ing to sell off or exit ar­eas like light­ing and trans­porta­tion in or­der to con­cen­trate on its power, avi­a­tion and health care sup­ply wings, re­it­er­at­ing plans to di­vest $20 bil­lion over the next two years. That in­cludes plans to sell Cur­rent, the Bos­ton-based en­ergy man­age­ment com­pany that em­ploys 50 peo­ple here and 2,300 world­wide.

GE has al­ready an­nounced lay­offs for a

‘This is the op­por­tu­nity of a life­time, to rein­vent an iconic com­pany. ... 2018 is a re­set year for us . ... com­plex­ity has hurt us.’

— JOHN FLAN­NERY CEO of Gen­eral Elec­tric quar­ter of its cor­po­rate staff — about 1,500 peo­ple — and some Bos­ton em­ploy­ees have been cut, a spokesman said, call­ing the cuts limited but de­clin­ing to give num­bers.

But the com­pany’s plans to move its cor­po­rate head­quar­ters to Fort Point, along with 800 jobs, re­main un­changed, and Flan­nery pitched the down­shift as an op­por­tu­nity to “rein­vent” GE.

“This is the op­por­tu­nity of a life­time, to rein­vent an iconic com­pany . ... 2018 is a re­set year for us,” Flan­nery said. “We’re go­ing to be a more fo­cused in­dus­trial com­pany ... com­plex­ity has hurt us.”

Flan­nery said the com­pany’s board will shrink from 18 to 12, even with five new mem­bers by next year, and he said cash bonuses for high-level em­ploy­ees will be re­placed by eq­uity. But he also pre­dicted earn­ings next year will be $1 to $1.07 a share, be­low mar­ket ex­pec­ta­tions — and ini­tial mar­ket reaction was poor, with shares de­clin­ing 7 per­cent af­ter the an­nounce­ment, as an­a­lysts said in­vestors are still wary of GE’s abil­ity to right its course.

“Given the un­der­per­for­mance, there’s been some cred­i­bil­ity that’s been lost,” said Jeff Win­dau, an an­a­lyst for Ed­ward Jones. “It’s go­ing to be a bit of a show-me story in the near term. If they can re­ally fo­cus on the big drivers of the busi­ness and mon­e­tize some of the oth­ers, in the longer term there stands to be some ben­e­fits.”

“They’ve got to demon­strate that they’re a fo­cused, dis­ci­plined and com­mit­ted com­pany. What we saw in the past 16 years is a com­pany that was just chas­ing lines of busi­ness, try­ing to catch some­thing wher­ever they can and that has not helped the com­pany,” said Ivan Fein­seth, direc­tor of re­search at Ti­gress Fi­nan­cial Part­ners.

“They needed a seis­mic shift.”

Fein­seth said he is more op­ti­mistic about GE now that spec­u­la­tion about its div­i­dend was over.

“Ev­ery­body’s worst fear about the div­i­dend is now be­hind them,” Fein­seth said.


`SEIS­MIC SHIFT’: GE CEO John Flan­nery, above, ad­dresses in­vestors yes­ter­day at a meet­ing in New York. Flan­nery said the com­pany is weigh­ing the fu­ture of its trans­porta­tion, in­dus­trial and light­ing busi­nesses. A ren­der­ing of the of­fice at the GE head­quar­ters to be built in Bos­ton, be­low.


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