GE will cut costs in its digital unit and focus efforts on its core businesses such as power, aviation and healthcare.
CEO John Flannery on Monday outlined GE's review of its businesses, plans to become more efficient and generate more cash flow and halve its dividend. During the review, analysts were speculating about what GE would do with its digital unit, which was seen as an investment in the future and the "industrial Internet."
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Flannery said GE is looking to simplify and apply rigor to the company's businesses. "We want to focus the resources on the company on key assets," said Flannery. "This is a heavy lift, but we know where we're going."
The CEO added that GE will examine its businesses with a "dispassionate eye" to improve performance.
Now GE will look to cut $400 million in costs from its digital unit and aim for $1 billion in revenue from its Predix platform.
In 57 slide investor presentation, GE outlined the following:
- The company will be "right-sizing structure" of its power unit and aim to take $1 billion in costs out.
- Aviation will get more investment and focus on digital and additive manufacturing opportunities. The aviation business is all about long-term service contracts.
- GE Healthcare will aim to improve product cost and quality, focus on lean manufacturing and accelerate digital efforts.
- Renewables, including wind turbines, will target blades technology and focus on costs.
While GE stopped short of a breakup--an outcome that has been pitched before--the company indicated that it would aim to be a better steward of capital.
In a nutshell, GE said its digital strategy will revolve around its core industries and curb ambitions to be a broader platform for the Internet of things. Asset and operations management will be a core theme as well as digital twin technologies. Technology like cloud that isn't differentiated will be delivered via partnerships.
GE also said that it will use additive manufacturing to bolster its businesses--especially in markets such as aviation.
Read also: Digital transformation about to face business reality vs investment tug of war | GE updates Predix to optimize utilities, enable smarter energy trading | GE aims to replicate Digital Twin success with security-focused Digital Ghost | C3 IoT CEO Tom Siebel: CEO, boards driving IoT, digital transformation deals
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