GE to split into three separate companies
ft.com
ft.com
> We’ll pursue a tax-free spin-off of GE Healthcare, creating a pure-play company at the center of precision health. We’ll combine GE Renewable Energy, GE Power, and GE Digital into one business, positioned to lead the energy transition. GE intends to execute the spin-off of Healthcare in early 2023 and the spin-off of the Renewable Energy and Power business in early 2024. Following these transactions, GE will be an aviation-focused company, shaping the future of flight.
So to paraphrase, GE Energy, GE Healthcare and GE aviation.
Most turbines GE Energy sells are aeroderived.
> ...A corporate sector dominated by institutional asset managers and executives whose compensation is based on near-term equity returns is highly incentivized to engage in activities intended to expand valuations even if there is no impact, or a negative impact, on earnings. Such strategies include spinoffs that aim to “unlock” value simply by isolating business units expected to trade at higher valuations, or other forms of financial engineering like stock buybacks. ...
> Consider, for example, the case of IBM, which plans to spin off its IT infrastructure division this year in order to “focus on high-margin cloud computing.” The move is being cheered on Wall Street because it is believed that the two businesses will be worth more as separate entities than as one. In particular, the remaining IBM cloud business should command a higher multiple once freed from lower-margin, slower-growing divisions.
> IBM has followed this same playbook for years: “We divested networking back in the ’90s, we divested PCs back in the 2000s, we divested semiconductors about five years ago . . . ,” said IBM’s CEO, explaining the spin-off. As a result of this strategy, IBM’s revenues and net earnings are lower today than they were in 1998. But its stock price and P/E ratio are higher.
This is a positive outcome for their financing arm - they've generated an increase in the value of their assets without having to risk any capital expenditure. Investors can speculate up the value of GE shares in the energy industry, or healthcare, or defense, without worrying about the other two holding their investment back. Whether the resulting companies is any more productive of actual goods and services than the unified company is irrelevant.
[1]: https://americanaffairsjournal.org/2021/08/the-value-of-noth...
Also this sort of phenomenons are rarely top-bottom. The American consumer is less and less prone to consume and more and more keen to invest.
If you talk to people and look at discussions on the interwebz it seems to me that the goal is not so much making purchases today with the aim of enhancing quality of life, but accumulating potential spending capability in the form of paper net-worth which you have the option (but not the obligation) to spend on quality of life at a later date.
Just look at Tesla, Bitcoin, real estate, interest rates etc. Basically every financial indicator says that people are more and more rejecting the marsh-mallow today, hoping to have multiple marsh-mallows in the future, which they'd also reject in the hope of having hundreds of marsh-mallows, which they'd also reject and on and on and on.
The anticipation of pleasure and quality of life becomes the goal, and the anticipation is fed by people circlejerking over their net-worth number or their gains on their paper gains on the stock market.
When you signal to executives that the company's most successful product is the stock that they sell, then it's not that hard to imagine that executives will be very receptive in treating the stock as a product, that's because they already have incentives as it is, then on top of that you have the populace asking to do exactly that and elevating those who do so as some sort of technoutopian cult leader making them rich (every reference to Lord Musk is incidental)
From 1971 to today, being off the gold-standrd, the count of dollars is increasing at a rate much faster than the value of assets created, so everyone wants more assets.
If you don't want to encourage rent-seeking behavior, you need to ensure that the count of dollars increases at a rate equal to the value of the assets being created.
Without a peg like gold, the dollar keeps loosing value. Even if a company stays with the same "real value", with dollar actually being less valuable, it's fairly normally for people to park their savings in company ownership rather tan dollars. Are these people rent seeking? They simple want to keep their capital.
> you need to ensure that the count of dollars increases at a rate equal to the value of the assets being created.
How? You can't predict how business will do. If Apple/Tesla/Amazon/Microsoft will be much more efficient than yesterday or do a bad strategy decision.
Money printing shouldn't be related whatsoever to how you think the big companies will fare. Whoever is trading stock simply must understand that Prices are in dollars, and dollars are deflating, so you can't compare the prices with old prices in a simple way.
It's all textbook BS. Everybody is subject to this passion for accumulation vs. spending , hence government actions are baked into it as well.
If the money supply is increasing at a rate faster than assets, you would raise the interest rate.
If the market really thinks the company is better off split then that's what you as a company should do - the capital has spoken. If it's a bad idea then maybe next time the capital will take the opposite position.
Same with bankruptcies, they're usually healthy. If your bonds trade at 50c on the dollar with an inverted yield curve you should file for it. Or the opposite - companies enjoying super low cost of capital (prime example - Tesla), if the capital thinks the company is so great the management should be trying to sell more shares and lock in some of that capital that's chasing it, assuming it can deploy additional capital in any meaningful fashion. And (existing or potential) competition should take notice.
In short, the capital tells you what to do. Even the Fed is kind of subject to the market, every time they stay behind or ahead of the curve (like when the yield curve inversion happens) there are usually consequences down the line for such trespasses against the consensus.
They're the same thing. Getting more productivity out of a given asset is by definition an increase in performance and efficiency.
If technological advancement does not satisfy the return of capitals, it simply turns its focus elsewhere, be it making wars, dealing drugs or slaves, or whatever that brings about the biggest return of capital within acceptable risks.
Nothing more, and nothing else. Technological advancement and others are simply by-products.
lol - and what by-products those are! Before widespread adoption of capitalism look at the pace of technological and economic development. How many people were in poverty - and I mean real poverty, not the ridiculous definitions of "poverty" we have today. Freedom, self-determination, governance - capitalism was the grease that unlocked the true human potential - everyone working collectively towards their own enlightened self interests. Search YouTube for Milton Freedman and the pencil - he does an amazing job of outlining just how remarkable the free market is when you think about it - even for something as simple as a pencil. Decentralized/cooperative beats the hell out of central planning every time - simply because there are far too many variables, even with todays modern technology.
Is capitalism perfect? Nope. It's simply leaps and bounds better than any other systems we have used before it. It's not even close!
>If technological advancement does not satisfy the return of capitals, it simply turns its focus elsewhere, be it making wars, dealing drugs or slaves, or whatever that brings about the biggest return of capital within acceptable risks.
How is war, killing your customers with drugs or even slavery remotely profitable? Especially since the capitalistic countries rejected slavery ahead of most other non-capitalistic countries.
You need to bone up on history a bit more and stop buying into political propaganda.
Lights Out, What happened to GE? The fall of one of America’s great companies.
https://moneyinc.com/largest-golden-parachutes-ever/
(skip to number 10)
This also applies for software engineering. Try to start a new project in some company, and you get the privilege of:
1. No need to maintain other shit mountain;
2. Get to start your own shit mountain;
3. Can come back as consult and win big bucks
4. Can speak at conferences about "How X is implemented in company Y"
I am coming around to thinking that all good things are driven by small teams of less than 10 people maybe even less than 5, who all have a shared vision and drive to accomplish something. Everyone else is just along for the ride.
It's a kind of obfuscation in many cases. How many people know that P&G or Unilever are behind a huge number of supermarket goods?
I think problems often happen when the big corporate owners sell to private equity who are more often interested in boosting short term earnings.
2) Unknown holding company: yes, people can have general knowledge and to a degree it's their own fault for not knowing. But it also isn't, nobody has time to read about what thousands of brands are out there.
> I think problems often happen when the big corporate owners sell to private equity who are more often interested in boosting short term earnings.
Absolutely. I remember going to Ed's Diner here in the UK. They made a great burger in SoHo before I left the country for a few years. When I came back, they'd expanded across the country, which was a bit surprising to me, but I went in to eat there because of my previous experience. I took one bite, it was terrible, and I immediately told my wife "this tastes like private equity". I go on google, guess what, it was indeed bought by PE and they'd totally changed the burger. This is a form of lying to people that should not be tolerated but of course is a grey zone because it not easy to define when you've changed the burger so much that you can't call it the same thing.
I think we probably mostly agree on the whole brands thing. My point was really that P&G / Unilever are probably better than most in practice at being decent stewards of the brands they own.
Was literally in a conversation just a couple months ago where I was expressing that I had finished deleting facebook for privacy-related reasons.
They chimed in with, "I know right! That's why I only use Instagram..."
I think the me of a few years ago would have discounted point 1). Today, I think it's a fairly salient point, with regards to actual market effects. Albeit, I'm not advocating for any action(s) to be taken with regards to it.
Sometimes when a company goes bankrupt, the most valuable asset sold is the brand name and the goodwill that goes with it.
As for GE Appliances, I had them in every apartment I lived in for about ten years. Never thought much about it until I moved to a place that had Maytag appliances. They were ten years old, but still better than the new GE ones in my previous place.
Now my apartment is all KitchenAid in the kitchen and Maytag elsewhere. It's was like stepping into time capsule to the future.
Example: KitchenAid is a subsidiary of Whirlpool, a huge competitor against Haier/GE Appliances.
Viking, who makes perceivably high-end ranges and refrigerators, is owned by Amana, who makes all of the cheap appliances you see at Costco.
See here for more: http://www.appliance411.com/purchase/make.shtml
As for me: I absolutely love my GE appliances. Have their washer and dryer set as well as one of their newer french door refrigerators; love them all.
Or you have the manufacturing ladder, where you start out making low end goods until you've built up QA and engineering practices that let you go up-market. Sony was once cheap electronics only, and eventually LG took over that crown before rebranding and moving to high end too.
Kia seems to have taken the latter approach, introducing the Genisis name for luxury goods only recently.
So even across the "big" brands it's mostly the same thing.
GE discovers that industrial IoT doesn't scale https://mailchi.mp/iotpodcast/stacey-on-iot-if-ge-cant-maste...
Also the HN discussion on the newsletter https://news.ycombinator.com/item?id=15155860 - September 2017 (73 comments)
> GE Healthcare will be spun off in 2023, with GE retaining a 19.9 per cent stake in the unit. GE Renewable Energy, GE Power and GE Digital will be combined into one energy-focused company that will be spun off in 2024. Once these transactions are completed, the original GE will focus on aviation.
So there will be a GE Healthcare (20% owned by GE, the rest owned by individual shareholders), GE Energy starting in 2024 (probably similar ownership structure) and GE. Shareholders of GE will be receiving shares of the other two, but the details of that aren't clear yet I think.
It looks like power is power, so it includes renewables, but also things like natural gas. It makes sense from an engineering perspective because they're all turbines and generators, but I can see why investors might want the pure renewable play.