Financial Accounting Blog

Friday, December 05, 2003

I finished this class on Monday, but some intersting events have occured here at GE, so I decided to post it. GE is reorganizing its businesses in an attempt to better align itself with the marketplace. From an accounting standpoint, one interesting item is that GE wants to be seen as a technology, services and finance company. One assumes that GE may expect a higher valuation on its stock price if seen strictly in these terms. Another item of interest is that GE expects to jumpstart earnings with this change (after a one-time restructuring charge, perhaps).
GE to reorganize divisions. Company pushes to return to 10 percent annual profit growth
IN AN E-MAIL SENT to GE employees, Immelt said he wants to streamline the corporation’s divisional headquarters while emphasizing GE’s future as a technology, services and finance company. Immelt’s plan combines businesses that serve common customers and industries.

The shake-up comes as Immelt pushes for GE’s return to 10 percent or better annual earnings growth, a benchmark that has eluded him since taking over from legendary Chairman Jack Welch in 2001. GE doesn’t expect to hit that target until 2005. It expects only modest profit growth next year.

GE said its reorganization will create new divisions that include Energy, Transportation, Infrastructure, Health Care, NBC-Universal and Advanced Materials.