What's going on?

General Electric (GE), one of the world�s biggest industrial companies, saw its stock jump more than 3% on Monday as investors embraced the resignation of its CEO and the promotion of a new senior executive to the job.

What does this mean?

The outgoing CEO, Jeff Immelt, may end up being best known for restructuring GE following the 2008 financial crisis. He turned a company that had developed a huge financial business (e.g. lending money) into one that is much closer to its industrial roots (e.g. a maker of jet engines) enhanced by a particular focus on digitization.

However, it hasn�t been a smooth transformation. For example, the big investment in digitization has dragged down GE�s profitability. GE said that the CEO change was part of a long-standing plan, although it may have been accelerated by factors like this.

Why should I care?

For markets: �No one is happy with the stock price right now,� says the new CEO…

…the question is what to do about it. It�s likely that cost-cutting initiatives, accelerated recently under Immelt following pressure from investors, will continue with the aim of boosting profits. Some investors think the new CEO is more likely to shake things up by selling one or two of GE�s businesses � a strategy that would likely appeal to investors who think they would be worth more if sold than the market is currently valuing them at. Clearly, given the stock price reaction, investors are a little more optimistic about the future.


The bigger picture: Immelt�s accomplishments will be measured in the long term.

A few years ago, Immelt spearheaded a big shift into digital strategy. It included things like buying 3D printing companies and better integrating data processing into the industrial machinery that it sells. Such a strategy is expensive to develop and hurts profits in the near term. Whether the moves will be successful has yet to really been seen. If, in a few years, GE is reaping the benefits of the investments he led, he�ll be due much of the credit.