General Electric (GE) announced Tuesday that it will be vacating, for the most part, the stylish address of 30 Rock. People know that address more than they know 1600 Pennsylvania Ave. Not only will it be vacating the building (with the exception of two floors), but it also sold the naming rights to the building. The large General Electric insignia atop one of the world's most recognizable buildings will soon be replaced by Comcast.
General Electric has decided that they want to focus on what they believe is their "core industry," things that work electrically. They're returning to more profitable enterprises. Owning the world's most recognizable television brand wasn't doing that for them apparently. The sale of its remaining 49% stake in NBC Universal means that the company will no longer be associated with Rockefeller Center, "Must See TV," or some of the top rated movies that Universal Studios has produced.
NBC was an evolution from General Electric's RCA brand nearly a century ago. The announcement resulted in an initial spike in trading. By the week's end the price had dropped slightly. General Electric's "core industry" will now be a fast growing infrastructure and energy business which showed a profit of $15.49 billion last year. The industrial side of General Electric also includes airline engines, electrical generators and medical equipment. It is far less glitzy but far more profitable.
The sale will also be very profitable to shareholders. The company will pay an approximate $3.2 billion in taxes on the sale, but 18 billion will go to shareholders this year. That's called a dividend and a buyback. If you own this stock - you already know this - that is very good news.
While General Electric is getting out of the television production and entertainment business, it is not getting out of the credit and debt business. It has recently extended its agreement with JCPenney (JCP). The co-branded credit card will allow consumers in the United States and Puerto Rico continued access to credit from GE Capital. Both the Bank and its Retail Finance divisions are among the biggest lenders in the United States. Currently the credit card holders enjoy up to 20% discounts on all purchases and use the typical shopper attractant of awarding points as rewards to be redeemed later. There are currently 1,100 JCPenney stores offering the GE credit card. Debt is currently in fashion, and this team up will certainly stay profitable. Again this is good news for the stock. The ticker didn't react in a newsworthy way upon the announcement. Many in the business expected this to continue.
General Electric Chairman and CEO Jeff Immelt announced Monday that they are bringing in Cognizant Technology Solutions' Frank D'Souza as the new GE director. Immelt said:
Our focus on helping customers achieve greater productivity through GE technologies makes his views all the more valuable for company. I am pleased to welcome Frank to our board.
D'Souza founded Cognizant and has been its director since 2007. So it's been quite a week for General Electric.
That announcement came right before its announcement to sell NBC Universal. While neither may be a huge surprise to the trained eye, the potential stockholder can find much promising in it. The one-month jump in stock-price reaffirms this position. The one week jump in stock price when compared to the price before these two announcements, affirms their aggressiveness.
GE's total revenue in the last quarter of 2012 told almost $40 million, with a gross profit of 6 million. The common stock primary dividend per-share was $.19. That quarter showed less profit by more than half than the previous three quarters. Opening up this quarter with these drastic yet prudent moves is sure to be an improvement.
As far as the infrastructure and power generation that GE will be focusing on, it has already won an award for its new LED Scalable Cobrahead lighting fixture. The Best-in-Class in the roadway lighting category was awarded at the NGL - Next Generation Luminaires competition. NGL was sponsored by the US Department of Energy, which no doubt GE hopes will be its biggest consumer. Two other of GE's outdoor public lighting fixtures were also recognized at the competition. This is the type of infrastructure technology that we can look forward to. The GE stock symbol is definitely a hold for investors, and a buy if you're not among them. The influx of cash, the intent and new leadership all point to their ageless motto, "We bring good things to life". Let's hope that applies to our pocketbooks as well.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.