What Will General Electric Company (GE) Do With Its Pile of Cash?

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Powering up
More positively for shareholders, GE also plans to continue to grow its core energy infrastructure businesses, both organically and through acquisitions. In the lead-up to the recession, GE Capital got so large that General Electric looked an awful lot like a bank with a captive
industrial manufacturing arm, with less than half of revenue coming from industrial businesses. Learning a positive lesson from the ordeal, Immelt determined to shrink the size of the finance business and have it focus on highly profitable lending activity more related to GE’s industrial background, like equipment financing and business loans. GE has plowed resources from selling off GE Capital assets, as well as the big chunk of change it received for selling its first stake of NBCUniversal, into growing the energy, infrastructure, and industrial businesses. Management has set a goal of increasing the share of revenue from industrial businesses to 70%.

Most notably, it deployed $12 billion to acquire and integrate a number of small companies to build up its oil and gas business, tripling the revenue of the segment to build a $15 billion enterprise. Oil and gas has been a bright spot for GE, and it was a good long-term strategic decision to muscle into the sector when low natural gas prices left good companies and valuable assets selling for cheap.

Recently, General Electric has been applying the same strategy in the mining equipment sector, and Immelt has expressed the desire to more than double revenue in its mining business from $2 billion to $5 billion over the next few years, through both organic growth and small tuck-in acquisitions. Immelt set a range of $2 billion to $4 billion for new acquisitions, and we’ll probably see continued expansion into oil and gas and mining, as well as continued consolidation of aeronautics companies that supply GE Aviation.

The article What Will GE Do With Its Pile of Cash? originally appeared on Fool.com and is written by Daniel Ferry.

Fool contributor Daniel Ferry and The Motley Fool own shares of General Electric.

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