The Media Begins To Catch On To Immelt's GE's Failures

Monday's Wall Street Journal featured an article about GE by Carol Hymowitz in her "In The Lead" column entitled, "Immelt Defends GE's Wide Reach."

I found this article revealing and noteworthy for two reasons.

First, Carol Hymowitz is one of the heavier-weight writers on the Journal's staff, in my opinion. For her to deal with GE and Immelt suggests real trouble at the ailing diversified conglomerate.

Second, she entitled her article in such a way as to portray Immelt on the defense, with something to prove.

Finally!

After nearly seven years of mismanaging GE, which, by the way, is either near or beyond the current average large-cap CEO tenure, a noted journalist at a name business publication is publicly calling into question Immelt's performance and judgment.

Specifically, Ms. Hymowitz notes,

"GE closed at $26.91 a share Thursday, about 32% lower than it was when Mr. Immelt became CEO in September 2001. In that same period, the Dow Jones Industrial Average has climbed about 15%. Being the Journal, Ms. Hymowitz isn't about to compare the industrial conglomerate to the more appropriate S&P 500 Index. But the effect would be similar.

The nearby Yahoo-sourced price chart for GE and the S&P500 Index clearly shows that, since 2000, GE peaked and has slid in value, while the S&P has remained flat to modestly up.

I've written so many pieces on GE that it's pointless at this juncture for me to link to any one of them, rather than another. Just click on the GE or Immelt labels to see my prior thoughts.

Suffice to say, I'm way ahead of Ms. Hymowitz in believing that Immelt's GE no longer has a reason to exist.

Other than to fund Immelt's lifestyle and retirement, and those of his immediate staff. The nearby 5-year price chart for GE and the S&P reinforces how badly the industrial giant has performed since late last year. It's been a one-way trip downward since late 2007, with one brief spike, resulting in near total destruction of any value created for shareholders of the firm beginning back in mid-2003.

Ms. Hymowitz characterizes Immelt as trying to shed GE's slower-growing businesses, in favor of "faster-growth technology businesses."

Good luck with that, Jeff.

Because GE has never been more than an average revenue growth company for the past several decades. A firm so broadly diversified and large just isn't going to magically become a tech-company-like fast growing enterprise.

For that, you need to be a single-purpose startup, like Google, that simply mines a rich, undiscovered lode of value.

Instead, GE is sort of like a large, mature mining operation, trying to swap this property for that one, hoping to squeeze out a little more growth and profit in the trade.

I see the very beginnings of the sort of sea change in investor sentiment, read 'selling pressure,' according to Ms. Hymowitz, that could, very belatedly, lead to GE's breakup and more value for its shareholders,

"In any case, to gain more support on Wall Street, the 52-year-old Mr. Immelt will have to do more than dispose of the slower-growth businesses that are identified with the GE that Mr. Welch ran. He also will have to convince investors that GE's vast portfolio, which includes everything from NBC Universal to biosciences, can be managed under one corporate roof and that the company doesn't need to be broken up or even dramatically streamlined."

I would quibble with Ms. Hymowitz's choice of words, substituting "managed to provide better, and consistently superior shareholder returns," rather than just "managed."

But the point is clear. Now, even Ms. Hymowitz is sounding cautionary notes about the need for GE to exist, and the need for its inept CEO, Jeff Immelt, to prove why the company should exist, not why those who call for its breakup should prove their case.