Once again, an old-school company fails to keep up. Or just fails. General Electric (NYSE: GE), which just a month or so ago seemed to be out of the woods after two years of declining earnings and dividend cuts, just warned investors of another year of lower profits and forecasted that its industrial operations — formerly its bread and butter — could be up to $2 billion cash-flow negative this year. Just a month ago, the market was cheering GE’s decision to sell one of its important assets, the company’s biopharma unit, to Danaher (NYSE: DHR) for $21.4 billion. The… Read More
Once again, an old-school company fails to keep up. Or just fails. General Electric (NYSE: GE), which just a month or so ago seemed to be out of the woods after two years of declining earnings and dividend cuts, just warned investors of another year of lower profits and forecasted that its industrial operations — formerly its bread and butter — could be up to $2 billion cash-flow negative this year. Just a month ago, the market was cheering GE’s decision to sell one of its important assets, the company’s biopharma unit, to Danaher (NYSE: DHR) for $21.4 billion. The deal is expected to close in the fourth quarter. But the proceeds won’t be reinvested in the business. Rather, the proceeds will be used to reduce GE’s enormous debt. At year-end, GE had $108 billion in debt (almost as much as it had taken in revenue during the entire year, which was $121.6 billion). The decision to reduce debt is the right one. The size of a company’s debt matters, especially when business suddenly slows. Too much debt can often lead to bankruptcy — even in a strong economy like ours today, let alone in leaner times. But when… Read More