General Electric reported greater operating profits and higher revenue in the first quarter compared to first quarter last year. However, their earnings fell short of expected earnings. Earnings per share were only 1 cent, falling far short of the 18 cent S&P Global Market Intelligence. GE shares fell by 1.2% in total in the first quarter.
GE announced in April 2015 that they would sell nearly $200 million of its assets. The sold off a substantial portion of their GE Capital division throughout 2015. They also asked the U.S. government to remove GE Capital's too-big-to-fail designation. GE's oil and gas business has taken a serious hit as a result of plummeting oil prices.
http://www.usatoday.com/story/money/2016/04/22/general-electric-first-quarter-2016-earnings/83376658/
The video that goes with the article mentions a quote from the CEO, who states that GE's portfolio is getting simpler and stronger. I can't help but think after seeing Too Big To Fail in class, that this idea of a "simpler" portfolio was spurred on by the 2008 housing market crash and proceeding fallout of Lehman Brothers and others, as a lesson of sorts to know the finer details of where their company is going and where it is putting its money. It seems GE is making things simpler not only for their investors, but for themselves.
ReplyDeleteI found it very interesting that GE has actually asked to be stripped of it's "too-big-to-fail" designation as some people may look at that designation as a sense of power and control, but clearly GE thinks otherwise. I'm also curious as to the type of assets that GE was planning to and has sold in the recent year. While most companies want to diversify their portfolio, it appears that GE is looking to simplify theirs.
ReplyDeleteAlthough it is unfortunate that the fall in oil prices has caused such a negative effect on GE, it is surprising and somewhat reassuring that the company is dealing with this incident in the way it has chosen to. By selling assets they will be able ti liquidate more cash and downsize in a positive way. Also, the fact that the company feels it is necessary to remove their too big to fail designation demonstrates the fact that the company really did learn from the Great Recession of 2008 and does not want to fall into the same trap of many large financial institutions including Lehman Brothers, Merrill Lynch, Bear Stearn and many more. The fact that they are no longer willing to buy into the problem of moral hazard shows that they will probably be less risky in their financial endeavors and more self sufficient since they cannot depend on a bail out. In a New York times article I read recently, it stated that most large banks would have to be bailed out if another financial crisis occurred which is clearly evident that they did not learn from their past mistakes, yet on the other hand, GE is being more cautious in the future.
ReplyDeletei think it is interesting to see that GE is going with a more simplified approach. i think that they removed the "too big to fail"designation because of the last recession and they do not want to fall into the same situation that some of those companies faced.
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