General Electric Co will radically shrink to focus on aviation, power and healthcare, betting on sectors it thinks it can make profits in, as the most famous U.S. conglomerate tries to revive its share price after a decade and a half of stagnation.
The 125-year-old company cut its dividend and profit outlook in half as it goes through the transition, in a widely expected plan unveiled on Monday by new Chief Executive John Flannery in New York.
Its shares fell 3.6 percent in early trading to $19.72 as investors worried how the slimmed-down company would generate cash to justify its stock valuation.
"By the numbers, we see a core operating performance that is below plan, and, currently, a consensus expectations curve that we think remains too high," said JPMorgan analyst Stephen Tusa.
GE stock is the worst performing Dow component this year, down 35 percent through Friday's close. Since September 2001, when recently retired Chief Executive Jeff Immelt took over, GE stock has effectively been dead money, posting a negative total return even after reinvesting its juicy dividends.
Flannery, who took over as CEO on Aug. 1, said he will focus on "restoring the oxygen of cash and earnings to the company."
The refocusing of the company likely means the sale of $20 billion of assets. GE will jettison businesses with "a very dispassionate eye," Flannery said.
That could mean exiting businesses like lighting, transportation and oil and gas, and GE could reduce its manufacturing "footprint" of factories around the globe, analysts said.
Dividend Cut
The dividend cut, only the third in the company's 125-year history and the first not in a broader financial crisis, is expected to save about $4 billion in cash annually.