December 17, 2018

General Electric is spinning off a separate digital company to keep the lights on

After a tough year, GE is creating a new, separate digital division in an attempt to stop stock prices from slipping further.

General Electric announced that it will now operate its digital business as a stand-alone software company.

After losing 60% of its stock value this year, GE is doubling down on its software services in an effort to turn around its fortunes — an approach that has barely kept the lights on in the past.

The internet is hard

GE’s decision to embrace the digital world is not new: In 2015, GE announced its plan to become a “top 10 software company by 2020.” 

But, after spending billions of dollars in acquisitions and hiring, GE remains far from its goal. Since it began its digital push, GE has churned through 3 separate CEOs, and many of its strategic plans have fallen through. 

GE is selling the majority stake in ServiceMax (the digital services startup GE acquired for $915m in 2016) after it failed to help get GE’s ‘internet of things’ business off the ground.

Starting over… with a startup

GE hopes that the separation will help the smaller digital company focus on “core verticals” and attract tech workers who are accustomed to equity packages at small startups.

Based on previous performance, GE expects its new business to do $1.2B in annual revenue. After last week’s announcement, GE’s stock rose more than 7%… or $0.78. Brutal.

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