General Electric, one of the darlings of Wall Street, due to its performance as well as its diversified portfolio of companies, is reporting a earnings shortfall. Wall Street is not happy and is wondering if GE is too big. Analysts are wondering if the breakup of GE is imminent and necessary.
The most likely breakup scenario involves sales or spinoffs of NBC Universal and GE Money (their financial unit). Shareholders would benefit by the billions and GE would focus on its core business of engines and turbines. Share were down almost $5 from a week ago and well below what they were before Jeffery Immelt took over as CEO in September of 2001.
The shortfall is not as critical as the fact that last month Immelt told investors that GE would reach their financial earnings targets. Thus, the shortfall was a shock to most. The famed GE credibility and reputation was quickly shot, despite its long tenure as a sure thing. GE and others blame the credit crisis for the shortfall. The sixth largest US company is considered a barometer of the economic conditions.
Despite Immelt's support from others at GE and his pleasant leadership style, he is on a short leash with investors. He does not favor a fire sale, but may have to spin off all the consumer businesses. Many ancipate a major shake-up of the executive team at GE as well.
Is it an over-reaction on the part of Wall Street, a blip on the screen, or is it a preview of major change and turmoil at GE and beyond?
When is big, too big? If you have to ask the question, the answer is probably: NOW! I predict major changes, shortly. Stay tuned.
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