GE, More Mutual Fund than Company

General Electric (NYSE: GE) reported a 47% decline in their fourth quarter earnings almost a week ago. But we’re still trying to get a handle on just what GE does.

Looking at their website, we’ve discovered they have no less than 14 divisions. Aviation, Electrical Distribution, Business financing, Healthcare, Media & Entertainment, Rail, Water, Appliances, Consumer Electronics, Energy, Consumer Financing, Lighting, Oil & Gas, and Security.

It sounds more like a phone book directory than a company’s business segments. Consider that GE’s revenue is almost 30 billion more than the gross domestic product of Kuwait. No matter how you cut it, that’s a massive organization.

But in the grand scheme of things, the number of business segments doesn’t matter as long as GE can remain profitable. The problem is that even if one or two divisions have a great quarter, if the other 12 don’t, then GE runs a loss. A company this size profits on a macro-scale along with national economies.

At issue for investors is whether GE’s CEO, Jeffrey Immelt, can afford to leave the dividend unchanged.

And that may be a lose-lose situation for Immelt. If they cut, they lose face with shareholders. If they don’t cut, they risk eating into their cash reserves and threatening their AAA credit rating. Neither situation is ideal, but the longer the recession goes, the more likely it is that one of these outcomes will happen.

Companies mentioned in this article: GE.

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