I told you this was a trap! It is a trap because nobody really knows what the f*#k is going on inside GE. This company is action-packed with issues and its liabilities are astronomical ($100 billion by some estimates). Servicing this massive debt is a huge burden and with interest rates rising things are going to get worse. How are you suppose to innovate when most of the money you generate goes to someone else? The market is finally factoring this in, which is why JPMorgan cut its price target to $6 a share.
Cutting jobs and selling assets might be the obvious way to tackle debt problems, but how many times have we seen this done in the past? Think Sears and its slow and painful journey into bankruptcy. The company sold some of its most valuable assets but it was never able to fix its deteriorating business. Sears lagged behind its competitors because its business model was obsolete.
When you look at the companies that are innovating today, the common denominator is cutting edge software-–powerful algorithms that run everything from supply chain logistics to customer engagement. This is how Apple and Amazon became trillion dollar companies and SpaceX made NASA irrelevant in space travel. Think about it, SpaceX can launch a rocket into space and return it back to earth to be reused in future missions for a fraction of the cost. That’s the power of technology and it’s hard to compete against it when you don’t innovate.
Financial engineering and overpaid VPs do not provide a competitive advantage anymore. So when I see a behemoth like GE struggling to compete in markets that it once dominated, it makes me wonder if it’s already too late.