Last week, the company clinched a deal to divest its power-conversion segment for half the price that was paid for acquiring it
For the first time in about nine years, GE’s stock dropped below $12 on Wednesday, when growing pessimism among investors over its recovery prospects triggered a selloff. The loss is about 12% in August alone, and the progressive decline accelerated mid-month.
RELATED: GE sells power-conversion business
Meanwhile, the lack of enthusiasm in the market might prompt Flannery to revisit his ambitious turnaround program, which is being implemented with the goal of restricting operations of the company to aviation, power and healthcare, its core businesses.
A closer look at the state of affairs shows that profitability of the industrial juggernaut is being hit hard by the ailing power division, and the latest quarter was no exception. Referring to the power segment, Flannery in the earnings call had said it would be a multiyear fix but assured there was ‘a very clear plan’ of what needs to be done.
RELATED: GE bets on spin-offs for turnaround
It could be a cause for concern as GE’s future will depend a lot on achieving a time-bound turnaround for the power division. The dismal condition also raises fears that the board of directors might go for yet another dividend cut in the near term to rein in outflows. Experts believe that despite the adversities, the only way out for the more than a century old company is more asset sales.
RELATED: GE Q2 profit drops, but tops estimate
