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General Electric Company (GE) Growth Car is Driven By Oil & Gas

The fuel that General Electric Company (NYSE:GE)‘s growth has been driving on is as obvious as it sounds, provided by its Oil & Gas division. CNBC‘s Mary Thompson tried to unlock the secret edge that the company has over its competitors in an interview with GE Oil & Gas’ CEO, Lorenzo Simonelli.

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“If you look at the blades, the carbon fibres, we are able to take that light weight material knowledge, bring it into the aspect of oil and gas. You look at the power and water, the capabilities on the turbines, bringing that into oil and gas […],” said Simonelli.

The business model is simple. General Electric Company (NYSE:GE)’s Oil & Gas division is essentially harnessing technologies from its other businesses like Electronics and Healthcare to give it an edge against long established competitors such as Cameron International Corporation (NYSE:CAM) and Schlumberger Limited. (NYSE:SLB).

Apart from the innovations mentioned above by Simonelli, they also include analytics in form of software that General Electric Company (NYSE:GE) provides its customers for scheduling and production purposes, and also diagnostics and monitoring services, technology from its health care division, to help their customers reduce unplanned downtime.

The second distinguishing feature of his division’s business model, according to Simonelli, is to stay close to their customers in the focus areas. Oil & Gas discoveries are mostly located in politically unstable countries. By keeping abreast of the political arena and close regular contact with their customers General Electric Company (NYSE:GE) has minimised these political risks.

Thompson reported that during 2009-2013 General Electric Company (NYSE:GE)’s Oil & Gas division has seen a 75% growth in revenue, which also means that the division was responsible for 43% of they company’s top line growth. The department’s $17 billion revenue for 2013 amassed 11% of General Electric Company (NYSE:GE)’s total revenue. Simonelli expects his division to outperform the 6% growth forecast for the industry.

Disclosure: none

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