Tuesday, December 2, 2008

GE Capital: Take Away the Doubts

Investors bid up the beleaguered shares of GE today, and looking at the slide presentation relating to GE Capital, there appeared to be some substantive reasons for to be optimistic.

The presentation conveyed the key strategic messages:

1. GE Capital was integral to the non-financial parts of the business going forward.
2. The business was going to be stabilized, refocused, and the business model tweaked to put it onto a more stable, long-term footing. Looking at the business model under drastically changed conditions is critical, and they did it.
3. There was no risk to the dividend from GE Capital. The whisper was that the dividend's in jeopardy. They took away that doubt.
4. GE Capital was number 1 or 2 in all of its key business segments. This is the long-held GE mantra that if they can't be a leader, they would exit the business. Thus, they measured themselves by the same strategic yardstick, not something new or invented on the spot.

This was a story that was well told. Of course, the devil is in some of the aspects of the markets unfreezing, but it looks like they have worked through likely scenarios.

Looking out beyond the current crisis, when investors are once again looking at global infrastructure plays, GE should look attractive on the commercial and industrial sides of the business.

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