Why GE Is Selling Its Industrial Solutions Business

General Electric (NYSE: GE) is exploring a sale of its $3 billion Industrial Solutions business, which will help the company shift its portfolio and shed low-margin businesses, while strengthening the high-margin industrial segments such as GE Aviation and GE Power. GE also recently agreed to sell its Water Treatment unit for $3.4 billion, which is seen as a smooth facilitator of the GE-Baker Hughes deal announced in November. The GE-Baker Hughes deal is aimed at strengthening GE’s Oil & Gas business, which has seen some struggles of late due to the weakness in oil prices. These losses have put pressure on GE’s overall margins, and this deal provides a way to cut costs and expand its focus on other areas.

GE Focusing Capital On High-Growth Segments

As early as April 2015, GE announced its intention to restructure its portfolio into more of a pure industrial company while moving away from its financial business. As of January 2017, the GE Capital exit plan is almost complete, and once it is, the company aims to derive 90% of its operating income from its industrial business.

While GE is selling off lower-margin and stagnant businesses, it has also been on somewhat of an acquisition spree and has made some recent acquisitions in fields such as Artificial Intelligence and the Industrial Internet of Things. The industrial internet is expected to be a $225 billion market by 2020, and we believe GE will be able to capture a significant share of this due to its strong market position and commitment to investing in this technology.

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