by Gail Kalinoski
, Contributing Reporter | March 04, 2016
In a wide-ranging, 19-page letter to shareholders, General Electric Co. CEO Jeffrey Immelt talked about GE’s efforts in the past year to move away from financial services and create a more streamlined “digital industrial” company, touching on GE Healthcare’s role numerous times.
“Becoming a Digital Industrial will require investment and will test our culture. Our success is not a given,” Immelt wrote in the message included as part of the company’s annual report. “We are creating a $15 billion software and digital company inside of GE, built on agile practices and new business models. We are plugging this software business into thousands of industry-domain experts and a $226 billion services backlog. There is no blueprint for what we are trying to do, and at times, it will be messy.”
He noted that the company’s plan, announced last month, to move its corporate headquarters from Fairfield, Conn., to Boston is part of its focus on keeping pace with technology.
“We must be in a world of ideas, so that we remain contemporary and paranoid,” he wrote in a section reported by The Boston Globe
. “This is behind our move to Boston. We plan to keep our corporate costs low – less than 2 percent of revenue – but having a big impact.”
While Connecticut tax policies and an incentive package provided by Boston and Massachusetts officials were important considerations in the planned move, Immelt wrote that the biggest reason was to become part of Boston’s high-tech “eco-system,” according to the Globe.
He spoke of selling off most of the GE Capital lending business, which had been a concern to investors after the financial crisis, and making its largest industrial acquisition – the $10 billion purchase of France-based Alstom SA’s energy business.
“We transformed our portfolio by exiting most of financial services while completing the purchase of Alstom, our largest industrial deal,” Immelt wrote. “This ends a period in which we refocused GE as a high-tech leader. To do so, we sold more than half the company where we lacked competitive advantage and rebuilt our core franchises.”
In a section dealing with activist investors, Immelt defended the company’s record of mergers and acquisitions. Without identifying it by name, he referenced the 2004 $9.5 billion purchase of Amersham Plc., which began the company’s push into life sciences. The Wall Street Journal notes
that many analysts still believe GE overpaid for the company.