Thursday, March 11, 2010

That’s the shape of your heart?

But for some reason, we know, it beats well, and beats shareholder expectations by miles too. The only issue is that it‘s making them unhappy now!

“In a very tough environment, we delivered fourth quarter business results in line with expectations we provided in December.” These were the words of Jeffrey R. Immelt, Chairman & CEO, General Electric Co. as the company announced the results for the quarter-ending December 2008 on January 23, 2009. You said ‘tough environment,’ Jeff? Joking right? But your corporation is stronger than ever, isn’t it? What about the Jupiter-sized cash infusion of $3 billion in October last by Warren Buffett. And didn’t the US Prez (apparently impressed by his coverage on GE Capital-owned MSNBC Universal) sanction a government loan package of a staggering $139 billion to you. But of course Mr. GE, it’s also really alright that your stock, trading at $10.04/share on the NYSE (as on March 17, 2009, having fallen by 73% compared to a year back) is at an 18-year low; nothing much to worry about, really!

Your financial results also aren’t too suicidal, with income for Q4, 2008 (at $3.72 billion), having fallen y-o-y by a murderous 44.4%. And the top-line figures? Well, they are modest too, with revenues for Q4, 2008, recorded at $46.21 billion, a sad y-o-y drop of 4.9%. And what about the other GE pride, your NBC Universal unit. We heard that it is also not giving smiles to investors, having posted a 6% decline in profits! But then as we said before Mr. GE, nothing much to worry about, really!

Then there are more matters doing the rounds in my family circle –that you did something which none could achieve at GE in 71 years? You actually slashed dividends from 31 cents to 10 cents a share per quarter? Guess, it must have got you busy on your voicemails of late! And what about this for pride... My office folks were also talking about you singing a ‘bailout’ song this summer alongside Rick (GM), Ed (AIG) and Viki (Citi). Wow! I’d want a record of that too... autographed!
And we read your bio too! It went something like this: Immelt took over as the 9th Chairman of GE in September 2007. An MBA from Harvard, Immelt joined GE in 1982. He became a member of the GE Capital Board in 1997 and the President & CEO in 2000. Named thrice as one of ‘World’s Best CEOs’ by Wall Street Journal’s Weekly publication (Barron’s), Immelt is also a member of The Business Council and the Federal Reserve. We haven’t missed awe-inspiring tales of your efforts at GE, to instilling investor confidence. However we’d beg an answer for the recent cut in GE Capital’s (GECC) ratings by S&P from ‘AAA’ to ‘AA+’, an event which has further shaken investor confidence. You gave no answer, and Robert did. He dropped a mail (by the way, Robert Schulz is a Credit Analyst at S&P), and this is what he wrote, “GECC is under increasing earnings pressure, due to the recent sharp deterioration in general economic conditions around the globe.” Controversy about the shaky liquidity position of GECC is also doing the rounds in our neighbourhood. And there are experts that claim that in case of delinquencies in loan repayments, GECC will not be in a position to bear the credit risk. (Oh! These experts I say!) Then there was an estimate by CreditSights, an independent credit research firm, which I bumped into over the Internet. It forecasted how GECC needs $25 billion to get to the level of banks of its size. (Well Jeff, I’m your fan, and I do have some ten dollars in my bank. Tell me if I can help.)

Alright, forget experts, forget Schulz, forget the world, but don’t forget me Jeff. You’re my hero. From you I’ve learnt how to reduce a company’s share price by 80% (as you did during your tenure of seven years). From you I’ve learnt to gear myself up for a high write-off in pocket cash this year. [GECC dangerously faces “very high” write-offs in 2009 too!]. And what’s best, even I am not sure of crossing the $10 billion in earnings this year, just like GE. ‘Tough environment’, Mr. GE. But, what a coincidence... Enough jokes!
For Complete IIPM Article, Click on IIPM Article

Source :
IIPM Editorial, 2009

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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