All Point, No Power
By William Davis
Story goes that Jeffrey Immelt, the longtime boss at General Electric, was a particularly polished presenter. Why, just last year the world’s most successful lightbulb salesman wowed the Wall Street crowd with his pitch at GE’s annual drink-‘em-up off the coast of Sarasota. “This is a strong, very strong company,” oozed Mr. Immelt, doubtlessly bolstered by a good piña colada and an even better infographic. “You betcha’ Jeff!” roared wobbly company executives. “Thanks for the great shrimp cocktail!” yelled Tom. “Why are we here?” shouted Mike. An enlightened time was had by all.
“Live Better Electrically” GE tagline from the1930s to the 1950s
And by enlightened, of course, we mean conned, at least when it came to the woozy board members and credulous industry analysts feasting on the company tab. The soon-to-retire CEO’s “Success Theater” was, in fact, a load of rotting blue chip. Nothing in the glossy handouts or Jeff’s pitchbook indicated that what had once been the most valued company in the U.S. and a pillar of the American economy was, in May of 2017, neither.
“Progress is our most important product” tagline from the 1950s to 1979
Actually, not one of Mr. Immelt’s 27 slides in his Longboat Key Club presentation spoke to the combined consequence of setting unreachable financial targets, executing mistimed bets on markets, and making unimaginably poor decisions on cash deployment. Instead, they – and he –pointed to GE’s awesome financial performance. “It’s pretty good really,” Jeff gushed to the fawning room. “Today, when I think about where the stock is compared to what the company is, it’s a mismatch.”
“We bring good things to life.” Tagline from 1979 to 2003
Fatefully enough, on that point Mr. Immelt’s pitch was spot on…there was a pricing mismatch. At the Florida confab, GE stock was trading near $28 – about twice what it was worth. Over the next 52 weeks, the company would erase more than $100 billion in wealth, slash its dividend payment, and pursue a restructuring that will likely result in a breakup of the former conglomerate. Along the way, GE stock became the cheapest of all 30 Dow components…a point not lost on the index committee at S&P Dow Jones Indices.
“Imagination at Work.” Tagline from 2004 to Present
In fact, the committee – unmoved by GE’s 110-year continuous run on the Dow Jones Industrial Average – is unsympathetically pulling the plug on Thomas Edison’s old electric company this week, replacing it in the lineup with drugstore retailer Walgreens. Meanwhile, CEO John Flannery, who took over the mess last summer, spends his days slashing jobs and cutting costs at what’s left of the company. No time, we understand, to fabricate a 2018 PowerPoint. Tom and Mike were unavailable for comment.
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