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GE chairman and CEO Jeff Immelt on May 19 addressed the 2010 Electrical Products Group (EPG) Conference in Long Boat Key, Fla., giving the investor audience a mid-year review of GE’s strategy and growth plans.
“GE’s environment is getting better but we’re cautious because of the volatility that’s out there,” Immelt said. “We’re seeing improving financials at GE Capital, strong momentum in key Infrastructure segments and progress toward expected year-end earnings growth over 2009.”
While global economic conditions remain challenging, he said, GE’s simple and strong portfolio with leadership franchises in key growth markets, multiple revenue streams and geographic diversity continues to provide balance. Overall, GE is positioned for attractive earnings growth in the next few years beginning this quarter, he said.
|Investing in innovation: GE’s focus today continues to be on growing its infrastructure businesses — and during the recession, GE maintained its intensity in innovation. Overall, GE increased its technology spend 18 percent this year compared to last year and the company will spend about $20 billion on innovation over the three-year period from 2010 through 2012.|
Regarding GE Capital, Immelt told investors that funding is in great shape, delinquencies have stabilized, losses and impairments are declining, origination margins are strong, reserve coverage is near all-time highs and capital ratios continue to improve. What that means is that we expect higher earnings sooner and expanding pre-tax profits. “GE Capital will be great for investors again,” Immelt said.
The executive said GE’s financial services business is emerging as a catalyst for near-term growth and its infrastructure business is positioned to drive long-term growth. That combination, he said, will provide significant allocation flexibility for GE’s expected year-end available cash of around $25 billion. The options for that cash include increasing GE’s dividend by 2011 to historical levels, potentially retiring preferred equity, making strategic Infrastructure acquisitions and restarting by year-end 2010 stock buybacks.
|Right prescription: In GE Healthcare, GE is expanding its reach with new product introductions in key areas such as diagnostic imaging and value products for smaller markets. In 2008, GE had 50 Healthcare product introductions and in 2010 we will have 100.|
Immelt's presentation underscored that GE’s future industrial growth will be driven by accelerating new product introductions, entering key adjacent markets, expanding services offerings, growing software and IT solutions, deepening company presence in emerging markets and continuing to address global socioeconomic challenges like clean energy and affordable healthcare through our ecomagination and healthymagination business initiatives. For example, GE expects to bring more new offerings to market over the next two years than in the past 20, he said.
Servicing those products and others’ could bring $300 billion or more in future revenues and improve customer productivity. And he noted that as the world’s 13th-largest software company by sales, GE has some 13,000 employees working on software and solutions that arm customers with actionable intelligence that improves productivity, boosts efficiency, drives innovation and ensures quality and regulatory compliance. That market is poised to grow at 10-15 percent per year from its current $4 billion in revenues. Added Immelt: “GE’s 2010 framework remains achievable and we see strong potential for upside.”
* View Immelt's presentation slides
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