Is GE poised to sell off its health care IT business?
October 26, 2017
by Thomas Dworetzky, Contributing Reporter
The divestment at GE may be continuing, and may include sale of its health care information technology business, according to a number of news reports.
CNBC, The Wall Street Journal, Reuters and others are reporting unnamed sources who have confided that “exploration” into the matter is now ongoing.
It would appear to be part of new Chief Executive Officer John Flannery's plan to spend the next two years or so shedding over $20 billion of assets, according to the Wall Street Journal.
Also looking to go on the block could be the transportation business. That group generated $4.7 billion in revenue last year, according to CNBC.
The form of the deals at this moment is unclear – they could be spinoffs, sales or partnerships.
In early October, GE weighed in with third quarter results that CEO Flannery called “horrible,” according to Reuters, calling the organization's strong parts weighed on by the weaker ones that, “drain investment and management resources without the prospect for a substantial reward.”
The company has pared its assets in recent years, including plastics, NBCUniversal and a lion's chunk of GE Capital.
The GE health care IT business includes parts that could well be separated in future sales, and has some well-known brands, including API Healthcare and Centricity EMR. The unit deals in electronic medical records, health care workforce management, and hospital revenue cycle management.
In addition to IT, the entire GE Healthcare enterprise includes magnetic imaging, medical diagnostics and drug discovery, and had a 2016 annual revenue of $18.3 billion.
Some analysts applauded the health care divestiture rumor, including over at The Motley Fool, where Lee Samaha provided three good reasons to favor it, including:
In June, when Flannery was tapped to be CEO, he called it, “the greatest honor of my career,” as well as stating that Immelt “transformed the GE portfolio, globalized the company and created a vision for the GE of the future by positioning the company to lead in digital and additive manufacturing.”
He advised that he wanted "to start with a fresh look around the company overall and, I think, with a sense of urgency," adding that “there are so many things we do well and have always done well and there are clearly some areas we need to improve on, and improve on quickly. No one's happy with the stock price right now or some of the cash pictures that we have had."
Stifel analyst Robert McCarthy noted at the time that GE's stock “underperformance” made the timing of the change unsurprising and in keeping with "investor fatigue with management's continued perceived ungainly portfolio actions."
CNBC, The Wall Street Journal, Reuters and others are reporting unnamed sources who have confided that “exploration” into the matter is now ongoing.
It would appear to be part of new Chief Executive Officer John Flannery's plan to spend the next two years or so shedding over $20 billion of assets, according to the Wall Street Journal.
Also looking to go on the block could be the transportation business. That group generated $4.7 billion in revenue last year, according to CNBC.
The form of the deals at this moment is unclear – they could be spinoffs, sales or partnerships.
In early October, GE weighed in with third quarter results that CEO Flannery called “horrible,” according to Reuters, calling the organization's strong parts weighed on by the weaker ones that, “drain investment and management resources without the prospect for a substantial reward.”
The company has pared its assets in recent years, including plastics, NBCUniversal and a lion's chunk of GE Capital.
The GE health care IT business includes parts that could well be separated in future sales, and has some well-known brands, including API Healthcare and Centricity EMR. The unit deals in electronic medical records, health care workforce management, and hospital revenue cycle management.
In addition to IT, the entire GE Healthcare enterprise includes magnetic imaging, medical diagnostics and drug discovery, and had a 2016 annual revenue of $18.3 billion.
Some analysts applauded the health care divestiture rumor, including over at The Motley Fool, where Lee Samaha provided three good reasons to favor it, including:
- “it's not hard to see how GE's employees can collaborate with development and production of engines and turbines across its power, aviation, transportation, and oil and gas operations. However, the technology crossover is less obvious with health care. In this sense, decoupling health care would help management truly focus on becoming a digital industrial company.
- “cutting production costs and generating synergies in aviation, power, and oil and gas, have constituted the key operational focus of the company in recent years. However, the main aim of the health care segment in the past few years has been improving the organic growth rate.
- “the market rewarded GE for the successful spinoff of its retail finance arm, Synchrony Financial, and the sale of GE capital assets. In other words, shareholders were rewarded when GE jettisoned non-core businesses.”
In June, when Flannery was tapped to be CEO, he called it, “the greatest honor of my career,” as well as stating that Immelt “transformed the GE portfolio, globalized the company and created a vision for the GE of the future by positioning the company to lead in digital and additive manufacturing.”
He advised that he wanted "to start with a fresh look around the company overall and, I think, with a sense of urgency," adding that “there are so many things we do well and have always done well and there are clearly some areas we need to improve on, and improve on quickly. No one's happy with the stock price right now or some of the cash pictures that we have had."
Stifel analyst Robert McCarthy noted at the time that GE's stock “underperformance” made the timing of the change unsurprising and in keeping with "investor fatigue with management's continued perceived ungainly portfolio actions."