General Electric was the world’s most valuable company in 2000 worth $480 billion, today it is worth $75 billion

“Go for a business that any idiot can run – because sooner or later, any idiot probably is going to run it.” ― Peter Lynch

Credit Rating(s) cut, quarterly dividend virtually eliminated from 12 cents to a penny, new CEO (again), new strategy, $5 billion in underfunded pensions …

GE share price November 2018

We pulled together a list of biggest companies by market capitalization from 1980 to 2018 (till date) and found something incredible – most are considerably worth much less than they were at their peak. Talk about long term investing …

Anyway, back to General Electric or GE. The world’s valuable company in the year 2000 with a market cap of $480 billion then and a management team considered amongst the best in the world. What went wrong?

GE kept buying companies over the past two decades using borrowed money. And it kept chasing new businesses like green energy or high-speed rails which it thought governments around the world would spend money on. They didn’t really invest in long term value businesses. Their business model over the past decade has been built around government policy and as we know both governments and government policies never stay constant.

Its most recent big purchase was French electrical equipment manufacturer Alstom in 2015 in which GE outbid arch rival Siemens. This acquisition was recently written down by $22 billion. Now GE needs cash, so it has arranged the sale of GE Transportation, plans to sell of its Baker Hughes oil services business and intends to spin off its profitable health services division. GE’s largest business, the Power division will be split into two businesses which are gas turbines and everything else. Even the power business is in decline.

Is it too little too late? GE under new CEO, Lawrence Culp may perhaps resurrect the company as a well-run manufacturing conglomerate. Only time will tell.

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