What's going on?

General Electric�s new CEO laid out his plans on Monday to turn around the huge but struggling conglomerate � yet investors appeared unimpressed, sending the stock down more than 5% to its lowest level in five years.

What does this mean?

General Electric (GE) has drastically reshaped itself since the 2008 financial crisis, most notably by selling its finance division (a moneylender, amongst other things) and buying a huge oil services business. But the makeover has left GE less profitable and less able to afford a generous cash payout to its shareholders (a.k.a. dividend) each quarter.


GE�s CEO subsequently resigned earlier this year and was replaced by the head of its healthcare arm, John Flannery. On Monday, Flannery said GE would focus on three core units � aviation, power and healthcare � and look to sell most of the rest (including the recently purchased oil business). He also said GE would pay out half as much in future dividends as it has as in recent years.

Why should I care?

For the market: GE�s stock has been walloped this year �� and the pain continued on Monday.

Prior to Monday�s announcement, GE�s stock was already down 35% so far this year. The latest slide may be thanks to GE significantly downgrading predictions for 2018 profit � but it may also indicate that Wall Street wasn�t impressed with the turnaround plan (which some say doesn�t go far enough).


The bigger picture: �Shrinking to grow� has been a popular strategy for companies in recent years.

Hewlett-Packard, which split itself into two companies, is one of several conglomerates that have sold off (or plan to sell off) disparate parts of their businesses. One theory is that the trend is being driven by the fast pace of technological innovation: it�s easier to be innovative when a company is relatively small and nimble. Although not in the plan disclosed on Monday, there is speculation that GE will keep slimming down until it splits its remaining divisions into three separate companies.