Why is difficult for GE's sale of lighting business
Recently, CNN, the US media, briefly analyzed General Electric's desire to get rid of its plight. The following is a translation, with some deletions:
General Electric has been linked to light bulbs for the past 126 years. Now, it is very difficult for General Electric to get rid of it.
GE has been cash-strapped for nearly a year since it announced plans to sell its lighting business and focus on such businesses as jet engines and MRI imaging equipment.
At present, General Electric (GE) has not yet found a buyer for the lighting business. The company’s CEO John Flannery told analysts in a conference call last month that GE is “actively discussing” with potential buyers.
However, the specific agreement has not yet been reached. This week, GE declined to provide progress on its sales of lighting business to CNN Money.
The difficulty of GE's sale of the lighting business underscores the bleak outlook for its lighting business.
Last year, GE's lighting sales fell by 59% to below $2 billion (about 12.78 billion yuan). Although lighting has always defined GE, it is the company’s smallest department today, accounting for less than 2% of its annual revenue of US$122 billion. GE decided to shift its focus to three core areas: healthcare, power and aviation.
For GE, the decline of the lighting business is not an example. This is a common problem in the industry, due to the low price and popularity of LED lamps for decades, limiting the need for replacement.
Another problem is that unlike GE's other products, light bulbs are now very mediocre. It is almost indistinguishable to distinguish one light bulb from another.
Cowen analyst Gautam Khanna said: "It has become more commoditized. It is not a technology-oriented business."
Earlier, GE also considered selling its century-old railway business.
Limiting its billing to the United States complicates GE's deal. For example, railway transactions are tax-exempt, but this transaction is complicated and lasts for several years and involves cash, stocks and derivatives. It also takes a long time to sell the lighting business.
Another question: If lighting sales are similar to railroad transactions, GE may still be trapped in high corporate debt.
A person familiar with the matter told CNNMoney that even if General Electric were to sell the railway business, the health responsibilities of US pensions and retirees would not be transferred to the new company and would not be enough to ease their debt concerns.