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Friday, July 14, 2006

Most Widely Traded 48 Hour Clock: Is GE Too Big?

Stocks: (GE)

24/7 Wall St. has begun coverage of the 36 most widely traded stocks, eighteen each from the NYSE and the NASDAQ. Most of these stocks trade over 50 million shares a week. This new feature will highlight each of the 36 stocks at least every 48 hours giving investors fresh infomation and perspective on the companies whose shares are most likely to move the broader markets.

Wall Street abandoned GE's shares after the world's most famous conglomerate announced that revenue from continuing operations were up 9% to $39.9 billion. Earnings from continuing operations were up 11% to $4.854 billion. The stock now trades where is was two years ago, at $32.27, a 52-week low. Even worse, with the ghost of Jack Welsh walking the company's halls, the stock has dropped from close to $50 five years ago. Over the five years, the Dow is up slightly and GE is down over 25%.

In all likelihood, part of GE's problem is that it is very, very hard to understand it as a company because its six operating groups do not necessarily have a relationship to one another. The company gets 28% of its revenue from its inustrial businesses which include plastics and equipment services. The unit only brings in 11% of profits. The company's infrastructure group contributes 29% of revenue but only 16% of operating profit. This unit includes aviation, trasportation, and oil& gas.

The company's stock reflects the fact that GE has not been growing very fast over the last two years. Over the last five years, GE's market cap has dropped roughly $200 billion.

Although there is no guarantee, breaking the company up into three or four logical pieces might well unlock some of the value. Certainly the commercial finance and consumer finance groups could be put together and spun out. NBC Universal hardly belongs in the mix at all.

The board at GE has to look at its options, because, for shareholders, things are not going very well.

Douglas A. McIntyre can be reached at He does not own securities in companies he writes about.

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