GE Does an About-Face on Digital
We are maintaining our fair value estimate as well as our very high uncertainty rating as the narrow-moat firm creates a new digital entity.
Narrow-moat-rated
The new company will have approximately $1.2 billion in revenue, but we are reasonably certain it will remain unprofitable for the foreseeable future. As part of the June 26 announcement regarding the intended separations of Healthcare and Baker Hughes, former CEO John Flannery said the cash drag on GE was a "significant negative number." Previously, the firm targeted no net cash drag from digital spending by 2020. Longtime followers of the company will recall that substantial portions of GE’s 2015 investor day were dedicated to Predix, which was then-CEO Jeff Immelt’s initiative to push GE into more technology-oriented offerings. San Ramon-based GE Digital, however, continued to struggle in the ensuing years.
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