Published: Thu, October 04, 2018
Medicine | By Daryl Nelson

General Electric replaces CEO with outsider Culp, shares soar

General Electric replaces CEO with outsider Culp, shares soar

General Electric is making a change at the top, naming Lawrence Culp, former head of tech firm Danaher Corp.to replace CEO John Flannery. The shares had dropped more than half since Flannery became CEO in August 2017, replacing Jeff Immelt, who had led GE since 2001.

GE has endured a hard year in which it has lost more than half of its stock market value and been ejected from the Dow Jones Industrial Average after more than a century's membership.

GE said it would fall short of its previously indicated guidance for free cash flow and earnings per share for 2018 due to weakness in its power business.

His successor, Culp, who had the unanimous support of the board, said in a statement: "GE remains a fundamentally strong company with great businesses and tremendous talent".

Shares of General Electric Co., based in Boston, surged 9% before the opening bell. The non-cash charge primarily relates to GE's acquisition of power assets from Alstom in 2015, GE said.

GE said the power division's goodwill balance is about US$23 billion and the impairment charge would eliminate most of it.

Culp served as chief executive officer and president of Danaher Corporation from 2000 to 2014.

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"Under Culp, investors may be willing to look further out to assess what GE may be worth post the planned portfolio moves, which may sustain the bounce in the stock that we expect today".

It's a track record that GE appears to need after a series of notable changes under Flannery failed to gain momentum immediately, although some analysts wonder whether Culp's history of accomplishments will be enough to reverse the direction of the company.

"During his tenure he led the highly successful transformation of the company from an industrial manufacturer into a leading science and technology company", the statement said. Flannery cut the blue chip stock's dividend in half past year. The company was expelled this year from the Dow Jones Industrial Average.

Earlier this year GE announced plans to dramatically reshape the company, with plans to sell off a range of businesses including healthcare, transportation and oil & gas, while focusing on three core industrial pillars: Power, Renewable Energy and Aviation. In the case of GE, the news proved to be overwhelmingly positive.

GE shares were trading at $12.60 shortly before 10.00am Eastern on Monday. Culp specifically cited improving GE's balance sheet and reduce its debt load, but acknowledged that he and his team "have a lot of work ahead of us". However, it over-expanded and has struggled with bad bets made before the financial crisis.

GE, however, has not seen such gains, particularly when it comes to its power business which was hit by problems with its latest generation of gas turbines and posted a $10 billion loss a year ago.

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