General Electric Co., the world’s second-largest company by market capitalization after ExxonMobil, should spin off its NBC and GE Money units and its real estate assets to unfasten value in the core company, Citigroup analyst Jeffrey Sprague said on Friday. Jeffrey Sprague further said in its report that a series of big divestitures would turn the firm into a ‘focused infrastructure juggernaut’ and may possibly repair its lackluster stock performance, which GE chairman and chief executive Jeffrey Immelt has recently called ‘frustrating.’
This is the second time this week when experts have opined that GE should take such steps. Nicholas Heymann of Prudential Equity Group Inc. in New York had recently said a company such as Google Inc. may be interested in buying NBC Universal as part of its attempt to add to its mix of media offerings including YouTube. Divesting assets would make GE, the world’s second-largest company by market value, easier to understand for investors, suggested Citigroup analysts including Jeffrey Sprague, who rates GE a ‘buy.’ Analysts feel that such steps could lift the stock to $45, or 26 percent higher than the last closing price.
By divesting assets that do not fit, the analysts believe that investors would be more likely to respond to GE Chief Executive Officer Jeffrey Immelt’s effort to tap global growth and keep profit rising at least 10 percent a year by selling equipment and financing for railroads, power plants and airlines.
Immelt had earlier said in a conference call after the company posted an 8 percent increase in first-quarter profit that GE will sell divisions if other companies can run them better. He rejected suggestions that GE may consider a large spinoff or breakup, referring to the company’s ability to trade a group of products in emerging economies that have faster growth rates than developed economies such as the US.
NBC Universal had contributed $16.2 billion, or about 10 percent, of GE’s $163.4 billion in revenue last year. GE Money had contributed $21.8 billion in sales and GE Real Estate had $5.02 billion in revenue and is one of the company’s fastest-growing units.
Experts and Analysts along with investors have since long hypothesized that GE might sell NBC Universal or spin it off. In fact, Immelt doubled NBC’s annual sales by adding assets including Bravo and Vivendi SA’s media assets. The division’s results have been damaged by the US broadcast network’s ratings decline, putting it off the rate of growth Immelt had earlier estimated.
