The topic is an old one, going back at least as far as my own graduate business school education in the late 1970s. In that sense, nothing in the piece was really "new" That is, how does a conglomerate provide a clear presence to the market for itself? And is it even necessary?
However, times have changed since I was a grad student, in that, now, a publicly-held company's long-term success measure is usually its total return.
So, the first thing I did, upon reading the piece, was to call up the Yahoo five-year price chart for UTC and the S&P500. That chart is displayed on the left.It's clear that UTC has nothing to worry about. The company's five-year performance is vastly superior to that of the index, and has had no significant downturns which lasted more than a few months.
Why waste money on corporate advertising, when the investors are getting such stupendous returns? Exactly who needs to know about UTC, the conglomerate, when the constituent businesses are delivering such surprisingly consistently superior performance?
It would seem that being a conglomerate is not, in this case, hurting UTC at all.
What is George David's, UTC CEO's, purpose in this matter? How will spending the planned $20 million affect the company's performance?
If UTC had stellar financial operating performance, but poor total returns, it might be different. But that's not the case.
And citing GE as an example of what it wants to emulate seems misguided, too. GE's returns have been abysmal under its CEO, Jeff Immelt, for five years.
Perhaps George David should save the $20MM for product development, and continue to improve his chances of continuing the difficult task of earning consistently superior total returns for his shareholders.
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